How to Make Your Own Fortune in the Stock Market in 2024

Smallcaps have had a fantastic 2023. As I write this, the BSE Small Cap index is up an impressive 45% for the year and counting.

I am sure the smallcaps in your portfolio have done equally well if not better.

Now, it is quite natural to have the temptation of attributing this good performance to our superior stock picking skills. We should resist this temptation though.

Attributing good performance more to skill and bad performance more to bad luck, can be dangerous from a long-term perspective.

It leads to arrogance and subsequently, to below par long term returns.

Keeping a level head and recognising the role of luck in both good as well as bad times is the way to go I believe.

Talking of luck, I really like how noted financial commentator Michael Mauboussin, spoke about luck in a recent interview and how it comes in two flavours according to him.

The two flavours of luck are independent luck and cumulative luck. Think of independent luck as coin tossing. Here, if you lose the toss five times in a row doesn't mean that your chances of winning are greater the sixth time.

The probability of you winning will still be 50% the sixth time. It is not going to be higher since you lost your previous five tosses.

What happens on the 6th coin toss is independent of what has happened on the first five. Hence, it is called independent luck.

What about the other flavour of luck, i.e. cumulative luck? As per Mauboussin, this luck is a cumulative process. What happens before leads to what happens next.

It is usually seen in social products like sales of books, sales of popular TV shows, sales of films, that type of stuff.

I think what Mauboussin is trying to highlight here is whether one is trying to make one's own luck or whether one is putting oneself in a position to have luck.

Making one's luck is an exercise in stupidity because by definition, luck is not in our control. It is something that's totally out of our control.

What we can do instead is that we can try to put ourselves in a position to have luck.

The simplest example of this is buying a lottery ticket. Now, this doesn't mean we are going to have good luck and we are going to win the lottery.

All we are doing is putting ourselves in a position where if luck goes our way, we are rewarded big time.

In fact, if Mauboussin is to be believed, putting ourselves in a position to be lucky might be a skill in and of itself. Hence, it is not really luck.

He calls it the breakdown of what's in our control and what's not in our control. And I believe this is the key to the good long-term performance.

We should not try to make our own luck by picking a bunch of random stocks and hoping that they would do well.

We should focus on things that are in our control i.e. picking fundamentally strong smallcaps that are trading at quite attractive valuations.

What is not in our control is whether it would take 12 months or 18 months or even 24 months for these stocks to start performing.

As luck would have it, it just took 12 months for the market to recognise their true potential and take most of them significantly higher.

Thus, we put ourselves in a position to be lucky i.e. stay away from expensive or bad quality small-cap stocks and the stock market did the rest.

I strongly believe this is the key to earning great long term returns in the market.

Do not try to make your own luck by buying stocks based on market rumours or the hottest trends.

But put yourself in a position to be lucky by buying fundamentally strong small-cap stocks with solid track record and then try to buy them at attractive valuations.

If you do this with discipline, you may end up lucky more often than not. This is my simple formula for making money from smallcaps in 2024 and beyond.

Happy Investing.

Warm regards,


Rahul Shah
Editor and Research Analyst, Profit Hunter