Margin of Safety - Deepstash

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SETH A. KLARMAN

Successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands.

SETH A. KLARMAN

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96 reads

#1. Emotions Play Havoc in Investing

#1. Emotions Play Havoc in Investing

Unsuccessful investors are dominated by emotion. Rather than responding coolly and rationally to market fluctuations, they respond emotionally with greed and fear.

We all know people who act responsibly and deliberately most of the time but go berserk when investing money. It may take them many months, even years, of hard work and disciplined saving to accumulate the money but only a few minutes to invest it.

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#2. Stock Market ≠ Quick Money

#2. Stock Market ≠ Quick Money

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.

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#3. Stock Market Cycles

#3. Stock Market Cycles

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.

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#4. First, Avoid Losses

#4. First, Avoid Losses

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.

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#5. Prepare for the Worst

#5. Prepare for the Worst

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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37 reads

Don't Forget This Tip

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IDEAS CURATED BY

kunalowl

Curious.

CURATOR'S NOTE

I will be sharing 5 key secrets from Seth A. Klarman's 'Margin of Safety'. Do comment & follow me for more!

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