Sanjay Bakshi: Sometimes The Best Investment Decisions End In Bad Outcomes

In his recent interview with Building Wealth With Rajeev, Professor Sanjay Bakshi discusses how sometimes the best investment decisions end in bad outcomes. Here’s an excerpt from the interview:

So you have to be able to distinguish between a good process and outcomes. You will get bad outcomes even if the process is good. So when you have bad outcomes you don’t have to blame yourself for that.

It’s just, you win some and you lose some and you move on. It’s just bad luck, not bad discipline on your part. The process may be absolutely fine but you may still have bad luck. A lot of people don’t get this, they become very depressed and start blaming themselves. They start looking for lessons when there aren’t any.

Just keep doing what you’re doing. If you are going to hit 7 out of 10 or 6 out of 10, what matters is how those six do and what happens to those four, how quickly you can get out of them without losing a lot of money, the ones that don’t work out.

So that’s one thing which you have to keep reminding yourself that ok I had a bad outcome, is it the consequence of a bad process? Or is it just a probabilistic bad luck situation that has arisen?

It’s not easy to make the distinction unfortunately in our field, the feedback is delayed. So, if you’re doing archery or shooting or even doing day trading, whether you’re good or bad, you get to know very very quickly right. But it’s not the case in investing.

So this whole thing of distinguishing between skill and luck is very very tough and you are obviously attached to the outcomes. So you start blaming… even though the process is ok, you don’t have to change. So it’s hard.

You can watch the entire discussion here: