Confusing Luck With Skill Maybe Detrimental To Your Retirement Years

Confusing luck with skill can leave you high and dry in retirement. Let me explain how luck, not skill played a part in your’s truly still being in one piece today.

Risk, Luck, Skill or Plain Stupidity

Back when I attended University in Ballarat, you could say I did some dumb things…

In my late teens, like most, thought we were invincible and indestructible.

Behind the University was a forest with loads of dirt roads. In our downtime, I’d head out with a friend of mine in my blue Holden Gemini, and we’d race along these dirt roads. Looking for 180 degree corners. Where we could go as fast as we could, pull the handbrake on and slide into the turn.

You could say we were risk takers until one day I saw my life flash before my eyes…

One day we thought we’d take this risk taking exercise closer to town. It was in a park, I can’t remember which one and probably shouldn’t have been doing what we did.

I was driving with my friend in the front passenger seat. We were racing through the park, largely just mucking around.

Until I lost control of the car and all of sudden headed sideways towards two trees. As they came closer, it became apparent that if the car did not straighten up, we’d have crashed into the two trees at speed and maybe not be here today to tell the story.

Instinct kicked in, I accelerated and was able to gain control of the car and steer through the two trees. Breaking hard as we passed through the two trees.

It’s a memory that still sits with me today. Still remembering my heart rate pumping out of my chest. I can’t even explain the adrenaline I felt at the time.

Was this risky?


Was it skill?

Unlikely as I was a young 18 year old…

Was it luck that I am still here today?

More than likely.

The Importance of Recognising Luck: Bill Gates

What’s interesting about Bill Gates’ success is it probably comes down to luck in more ways than one.

Bill Gates went to one of the only schools in his time that had a computer.

Is Bill Gates one of the world’s geniuses? Is he hard working? Did he take a huge risk? Is he a visionary?

Yes to all those.

But here’s the thing, did he have a ridiculous stroke of luck?


Out of all the schools in the US, he happened to be attending one of the few that had a computer at the time.

But here’s the thing, if I was to say Bill Gates was lucky. You’d probably push back and say that’s ridiculous.

It’s easy to ignore or look past luck as we look to others who we look up too.

It’s hard to emulate luck in the future. It’s something very few people talk about.

But luck can be disguised as success or skill without really understanding what’s happened.

I’m not saying there’s anything wrong with that. Luck plays a part in our lives all the time.

What I’m saying is don’t confuse luck for skill…

A stroke of genius or luck…

In 2017, one of my long term clients made a decision they wanted to be more ethically invested. At the time this was a fairly new way of investing. There was little research and very few options available at the time.

We conducted a fair chunk of research to find opportunities that would meet my clients needs.

One could say at the time, it was no easy assignment…

But we managed to build a portfolio which met their needs. It was one of a kind we’d set up at the time.

Fast forward to 2020, share markets had been smashed due to the world being shut down due to Covid 19. Portfolio value’s plummeted in a short space of time.  Everyone was panicking.  This was a once in a lifetime event, no one had planned for.

My client phoned me during 2020 and was asking about the balance of their portfolio. When I looked it up I was shocked, surely there was something wrong. Even mentioning, I’m not sure this is correct, I’ll need to look into it further.

While every other portfolio and to be honest everyone in the country were experiencing negative returns, they showed a positive return.  And a good one at that.

Surely there was something wrong…so I did a little more investigation.

And sure enough they were up some 20%, which was abnormal in 2020.

But here’s the thing, nothing made sense. There was one investment we had selected that had skyrocketed. I looked at the number’s, nope, no real increase in profits, price to earnings were off the charts. There’s something wrong here…nothing made sense.

I even reached out to people more experienced than me and they couldn’t explain the increase in share price.

So, we made a decision to sell some of the investment…

Here’s the thing, we could have done what most do, hold. We’d bought in at 61 cents and in the depths of Covid 19 topped at $9 per share. They were sitting at a multiple six figure profit…

Over the next 12 months we continued to sell down. We still hold the investment for this client today, albeit at a much lower percentage of the portfolio.

Through disciplined selling, they added at least $200k to their balance.

A lot would say this was pure skill. While I’d like to take the credit for this, luck played a large part in the outcome.

Here’s the thing, there was no logical reason why the share price rose so sharply and was largely driven by speculation more than anything. Something you can’t bank on.

Here’s where many make the BIG mistake. Thinking their decisions and results are based on skill. While that may be the case for a limited few. For the majority of us it’s pure luck.

Relying on luck, or not accepting some of your results were a case of luck can set you up for a dangerous outcome.

Most people would have held and watched the roller coaster ride and missed out on the opportunity to cash in.

Investing is all about being disciplined, realising your winners are largely due to luck and not skill. Once you realise this, you will be able to make better financial decisions.

Have you ever considered how luck may have played a part in your financial decisions?

Three types of risk…

But here’s the thing, according to Morgan Housel, author of The Psychology of Money there are three types of risk.

# 1 The odds you will get hit

#2 The averages of getting hit

#3 The tail-end consequences of getting hit

The first two are easy to understand…

The last one is the hardest to learn. The one that will hurt the most and can only be learned through experience.

Sadly we see this happen on a regular basis. People who think they know everything, where results are largely due to luck. Which they don’t acknowledge and it’s this false confidence that hurts them later on when they ignore the tail-end risks.

Take John for instance, had largely gone it alone and saved diligently over his working years. He’d made his own investment decisions and when I looked at his portfolio, had done a pretty good job.

However, when I started asking questions about his portfolio, there was no logic to the investment decisions that have been made.

He could have continued with his current strategy, however, we identified a major risk as he entered retirement.

Through their working years, they had their income to rely on and live off and didn’t have to worry about market movements in their portfolio.

If he continued with this current path and markets crashed he could potentially see his portfolio half. And they will experience a number of market events through retirement.

When I explained this to him, it was not something they had considered and definitely something they wanted to protect them themselves against.

The impact of such a fall would lead them to reconsider what they spend their money on. Not something they were willing to do.

We de-risked their portfolio so they could maintain their ability to spend when a severe market downturn happens without seeing their portfolio plummet significantly.

Another couple, Harry and Candice, a couple of years out from retiring. Thinking about borrowing and buying an investment property.

While this may prove to be fruitful, it’s a BIG risk if it doesn’t work out. We’ve seen many people apply a similar strategy for it to backfire and lose hundreds of thousands of dollars. An amount that’s hard to come back from so close to retirement.

But what they didn’t know is how their current numbers stacked up. We were able to show them that they did not need to take on this type of risk. In fact, they were going to be okay if they implemented a few small changes to their current plans.

Tail-end Consequences Is What Will Harm You In Retirement

There are many risks you need to address as you approach retirement. After many years of savings and investing. You’ve now got to change your approach to one of preservation and income as you use your money to fund your retirement.

It’s the risk’s you don’t see, or don’t address that will harm you in retirement and wreak havoc.

Many people refer to “I don’t know what I don’t know”.

After all, you haven’t retired before so don’t know what to expect.

This is one of the biggest transitions in your life, and it’s important to seek professional financial advice to ensure you are well set up for your retirement years.

It’s a little like setting off on a trek. You have your map and directions. But as you progress on your journey there’s challenges you’ll face. Obstacles to overcome…

It’s better with a guide, who’s walked the journey many times, someone who’s aware of the challenges you’ll face and knows how to overcome them.

Don’t let tail risks destroy your dreams of a happy and comfortable retirement.

Stop Drifting Into Retirement… 

One of the biggest mistakes we see people make is drifting into retirement. Here’s the thing, you may not even know you are doing it. Drifting into retirement without having a plan.

In life, we’re drifting all the time. We drift into being a little overweight. We drift into not being as fit as we’d like. We drift into not having enough time for those we care about. Even our relationships can drift over time.

Life is a bit like that and retirement is no different, people drift into retirement without having a plan and any real direction.

But drifting into retirement may lead to retirement regret. Regret you didn’t take action earlier. Regret you didn’t plan earlier. Regret you can’t do all the things you had planned to do in retirement.

But if you want to arrive at retirement, whatever date that may be for you, saying I’m ready for this.

I’ve got a plan to navigate this important period of my life. I know what to expect. I know how much I can spend. I know how things might pan out. I’ve got safety margins in place. I know the level of risk I need to take. I know how to fund my income. I know I have enough. I know what I’m going to do.

I just can’t wait for this period of my life.

Imagine a retirement like this, one where you have the confidence, clarity and control over your retirement. Take the first step by booking your Retirement Clarity Call by clicking here.…

Glenn Doherty – CFP – Financial Planner | Retirement Planning Made Simple for aspiring grey nomads and avid travellers within 7 years of retirement

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Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at date of publication. This is an online information blog. It does not imply an offering of securities.

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