The preface of Nassim Taleb’s book Fooled By Randomness includes the following;
The kind of luck in finance is of the kind that nobody understands but most operators think they understand which provides us a magnification of the biases.
Taleb is quick to point out that luck does favor hard work and those who are prepared. I would layer on top of this idea that what we do with bad luck is also very important.
“Bad luck” will also be our own perception in that an event like 2008 will hurt the vast majority of people but it is easy to envision individuals viewing such an epic decline as their own bad luck…really it was a shared experience.
The solution to not being done in by bad luck has to include not succumbing to the emotion caused by bad luck, remaining disciplined to whatever your strategy/methodology is and giving proper attention to things that are more likely in your control like saving habits and consumption habits.
All market participants will have some combination of bad luck and good luck along the way which means another piece of the puzzle here is understanding that occasionally you will have bad luck, not just with investing but also in life.
Accepting the fact bad luck will come along doesn’t mean being a negative person, quite the opposite as I think the ability to remember bad luck is apart of life and investing makes it easier to bounce back.