🧠 Skill, Luck, and Longevity

Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today’s Issue Read Time: <3 minutes

Lesson: Is investing all luck?
Timeless Content: Invest & Be Happy in a Chaotic World
Thread: 38 Investing truths
Resource: Back door Roth calculator
And more!

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Friends,

On August 29, 1776, George Washington found himself in a tough spot. Realizing the Continental Army was outnumbered 2-to-1 by the British, he retreated to Brooklyn. He needed to reach Manhattan for an escape — but the East River stood in the way.

If the Red Coats — just a few miles away — acted, the war would’ve ended before it began. No sea-to-shining-sea, no government by the people…none of it.

But on the morning of August 30th, Washington got lucky: it started raining, the wind blew against the Red Coats, and a fog rolled in to provide cover for the Continental Army. Narrowly, they made their escape.

Seven years later, Washington claimed victory.

We like to think our success was destined. But luck plays a larger role than we’d like to admit. Consider what would have happened if:

Tesla had any bottle-necks in 2018, missed its debt obligations, and been forced to be bought out or declare bankruptcy.
Amazon didn’t have a staff retreat in 2003 where leaders identified digital infrastructure as a core competency — leading to the formation of AWS seven years before serious competition emerged.
Netflix accepted a buyout off from Blockbuster twenty years ago for $50 million.

None of this is to say that skill doesn’t have its place. It’s just that luck is also a huge, under-appreciated part of the equation.

In the world of personal finance, gains are more governed by luck, while avoiding huge losses has more to do with skill. You’ll never know if you picked a 30-bagger from skill or luck. But the ability to avoid lifestyle creep, keep cash on the sidelines, and adequately insure yourself is a skill everyone can develop.

Over the long run, that’s the equation: use your skill to avoid trouble and keep you around long enough to benefit from the positive luck that’s bound to come your way.

Here’s to the prudent approach that keeps us all around to fight another day in the investing arena,

– Brian Feroldi, Brian Stoffel, & Brian Withers

P.S. 👨‍🎓 The next cohort of our Valuation Explained Simply course starts on May 6th! Click here to enroll with a $249 “Friends of the Brians” discount.

One Simple Graphic:

Buy high-quality businesses, and your portfolio will concentrate itself.

One Piece of Timeless Content:

The theme for this week’s introduction came from a podcast featuring Morgan Housel and Derek Thompson called How to Invest & Be Happy When It Feels Like the World Is Falling Apart. The conversation centers around Housel’s recent best-seller — Same as Ever. It’s a great read on the timeless themes surrounding the world of investing.

One Thread:

Brian Feroldi

@BrianFeroldi

I’ve been investing for 18 years.
Here are 38 short investing truths I’ve learned the hard way:

9:12 AM • Nov 13, 2022

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One Resource:

Does your high income exclude you from funding a Roth account? The “back door Roth” method allows you to transfer assets from your IRA to a Roth account. But there’s a catch. You have to pay income tax on the amount converted. Sound complicated? Check out this calculator to see whether the “back door Roth” is for you.

One Quote: