Jesse
Livermore - legendary trader - once mentioned this great axiom:
This
reminds me of Warren Buffett and Seth Klarman.
Warren Buffett once said that "the
first rule of investing is
"Don't lose money," and the second rule is, "Never forget the first
rule."
Seth Klarman too has his own version. He 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.
While no one wishes to incur losses, you couldn't prove
it from an
examination of the behavior of most investors and speculators. The
speculative urge that lies within most of us is strong; the prospect of a
free lunch can be compelling, especially when others have already
seemingly partaken. It can be hard to concentrate on potential losses
while others are greedily reaching for gains and your broker is on the
phone offering shares in the latest "hot" initial public offering. Yet
the avoidance of loss is the surest way to ensure a profitable outcome." - as seen on mootleyfool
There
is another great saying by Prof.
Sanjay Baksh *. He says
"Risk and return are negatively correlated. If
you want to increase return, you must reduce risk of
permanent loss of capital .
Happy Investing !!!
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