Former poker champ Annie Duke says bad investors chase luck — great investors lean into uncertainty

Since becoming a world champion poker player, Duke has pivoted into investment consulting. She works as a decision strategist for everyone from individual investors to venture capital firms (2).

Here are some of the mistakes she says bad investors make regularly and what good investors do differently.

Don't confuse good results with good decision-making

Beginner investors frequently base their investing decisions on other people's portfolios, seeking out people who have recently posted big returns. Duke said that can lead you down the wrong path.

"A large return in isolation should actually make you suspicious. It usually means high volatility, which means a lot of the result was luck," she said.

She calls the tendency to assume a good outcome "resulting," adding that it's common throughout the investing world. And she uses Zoom as an example.

"Someone invested in Zoom in 2019 and made a fortune when the pandemic hit. They may have had a legitimate thesis about video conferencing's future. But they did not forecast a global pandemic," She said. "Taking full credit for that outcome is resulting. It wasn't their decision; it was an act of luck."

Sébastien Page of the CFA Institute admits that luck can inflate your short-term investment gains, leading investors to think their investment strategy is working when it isn't (3). He added that "cultivating self-awareness" is key to long-term success.

"Focus on your decision-making process rather than outcomes. When you're winning, remember that luck may be involved," he said. "If you miss your target, don't beat yourself up."

Duke recommended writing down your investment reasoning before you invest. That way, no matter the outcome, you can look back on your thinking and figure out where you went right or wrong.

Duke's three steps to market uncertainty

In an uncertain or "frothy" market, it can be hard to determine whether stocks are about to crash. Duke suggested looking at past trends to help guide your decision.

"The starting point is what I like to call the base rate. What has historically happened in situations like this one?" she said. "That tells you whether things look normal or whether you're in territory that has preceded corrections before."

For example, investing based on headlines might have you go all-in on AI company stocks. But base rates could suggest OpenAI's projected revenue goals for the next five years are unrealistic, indicating the company could underperform (4).

Once you have a historical reference point, Duke says investors should focus on the present. Ask yourself what's different now compared with then. Is there something about the current market that makes it different enough from past examples to suggest a different outcome?