Kunal Verma's Key Ideas from Margin of Safety
by Seth A. Klarman

Many unsuccessful investors regard the stock market as a way to make money without working rather than as a way to invest capital in order to earn a decent return.

Anyone would enjoy a quick and easy profit, and the prospect of an effortless gain incites greed in investors. Greed leads many investors to seek shortcuts to investment success.

All market fads come to an end. Security prices eventually become too high, supply catches up with and then exceeds demand, the top is reached, and the downward slide ensues.

There will always be cycles of investment fashion and just as surely investors who are susceptible to them.

Warren Buffett likes to say that the first rule of investing is "Don't lose money," and the second rule is, "Never forget the first rule."

I too believe that avoiding loss should be the primary goal of every investor. This does not mean that investors should never incur the risk of any loss at all. Rather "don't lose money" means that over several years an investment portfolio should not be exposed to appreciable loss of principal.

Investors’ intent on avoiding loss must position themselves to survive and even prosper under any circumstances. Bad luck can befall you; mistakes happen.

The prudent, farsighted investor manages his or her portfolio with the knowledge that financial catastrophes can and do occur. Successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands.

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