1. Always Insist on a Margin of Safety. Keep in mind that no asset class or stock sector or particular commodity is free from risk. Always think safety first, being right second. Your thesis may be correct on paper, but you can go broke along the way.
2. This Time Is Never Different. The four most dangerous words in investing are “this time is different” because these words set up false expectations. A new era does not mean the era is different in principle. It may simply be a wolf in different clothing.
3. Be Patient And Wait For your Trade. Many investors suffer from “action bias” or a desire to do something. However, when there is nothing to do the best thing to do is nothing.
4. Be Contrarian. The herd is usually wrong. The punch bowl of speculation is usually spiked with denial. Be careful getting in when the getting is at the end.
5. Risk Is Permanent Loss of Capital, Never A Number. Pay attention to valuation, fundamental, and financial risks and thus avoid permanent impairment of your capital.
6. Be Leery of Leverage. Leverage is a dangerous beast. It can’t turn a bad investment good, but it can turn a good investment bad. Whenever you see a financial product with leverage as its foundation you should be skeptical, not delighted.
7. Never Invest In Something You Don’t Understand. If something sounds too good to be true it probably is. If you do not understand where your money is going then don’t press the pedal ’cause the vehicle may be in reverse.
Invest when the law is on your side; otherwise you may find yourself on the other side of the barbed wire fence at BROKE prison.
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