Annie Duke, the former World Series of Poker Tournament of Champions winner and author of Thinking in Bets and Quit: The Power of Knowing When to Walk Away, said investors often make costly mistakes by confusing lucky outcomes with strong investing decisions during speculative market rallies.

Speaking in an interview with MarketWatch published Tuesday, the poker pro turned investing coach outlined a three-step framework for evaluating markets that appear overheated. She said investors should first study historical market behavior, then ask whether current conditions are genuinely different from prior cycles, and finally prepare in advance for the possibility that their investment thesis may be wrong.

“The starting point is what I call the base rate," Duke said, referring to how similar market environments behaved historically. She said investors should examine whether valuations, momentum and investor behavior resemble periods that previously ended in corrections or bubbles.

Duke used Amazon during the 1999 dot-com era as an example of a company that appeared overvalued at the time but ultimately justified higher valuations because its business model differed significantly from traditional retailers.

She also advised investors to imagine scenarios where their investment thesis fails and identify warning signs early rather than becoming emotionally attached to positions.

AI Bubble Debate Intensifies

The interview comes as Wall Street continues debating whether the current artificial intelligence rally resembles the late-1990s tech bubble.

Earlier this week, CNBC host Jim Cramer said markets were punishing disappointing companies even more aggressively than during the dot-com era while investors continued concentrating heavily into AI-linked and data center stocks.

Separately, Cathie Wood recently described several former dot-com era technology companies as "blasts from the past," arguing the AI infrastructure boom was reviving firms many investors had previously written off.

Duke also discussed how poker shaped her investment philosophy, saying the game taught her how much uncertainty and luck exist in decision-making. She said successful investing is less about certainty and more about adapting quickly when new information appears.

Long-Term Discipline Matters

Duke warned that many investors panic during market downturns because emotions, herd behavior and loss aversion distort decision-making. She said advice such as "never sell in a bear market" works for many retail investors because it helps prevent panic-selling during sharp drawdowns.

She also criticized investors for chasing strong returns without determining whether those gains came from skill or simple luck. Duke said investors frequently compare performance against the wrong benchmarks and underestimate the role of randomness in short-term market outcomes.

The former poker champion recommended low-cost ETFs and index funds for most retail investors, arguing that many people become paralyzed during uncertain markets and stop making decisions altogether.

Her comments also echo recent remarks from Elon Musk and Anthony Scaramucci. Musk recently advised investors to buy companies they believe in and avoid panic-selling during market downturns, while Scaramucci said his "biggest investing mistake" was selling strong investments too early and urged investors to stay invested through volatility.

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

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