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2 comment(s). Last comment by stockraider at May 13, 2021 4:05 PM
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RainT
8315 posts

Posted by RainT > May 13, 2021 2:43 PM | Report Abuse

HOLD


stockraider
24223 posts

Posted by stockraider > May 13, 2021 4:05 PM | Report Abuse

ALWAYS REMEMBER TO HEDGE YOUR SUCCESSFULT BETS ON GLOVES, TECHNOLOGY AND VACCINE WITH COMING PALM OIL SURE PRICE SURGE MAH!

Peter Bevelin, in his wonderful book “All I Want To Know…” tells the story of Napoleon’s mother, Letizia. She couldn’t understand why Napoleon should take on the British since things were going so well. So, she sold all her French holdings and exchanged them for British pounds.

Why? She reasoned, if her son won, she should have a good life in the victorious nation. But if Napoleon lost, she would not be wiped out but still be ok since she had the pounds. She hedged against the possibility of facing a zero.

Letizia’s story is the perfect example of how to arrange our affairs in life to protect against the downside.

“Anything times zero is zero,” said Warren Buffett, “and I don’t care how good the record is in every other year if one year there’s a zero…Charlie and I have seen guys go broke or close to it because 99 of 100 of their decisions were good, but the 100th did them in. “

Buffett uttered these words in Berkshire’s 2007 annual meeting which was a year before the global financial crisis blew up investors’ money.

The benefit of looking at the downside or what can go wrong is efficiency, writes Bevelin in his book –

Take investments as an example – If you first eliminate what doesn’t work or what won’t achieve what you want, you don’t have to spend a lot of time and attention analyzing the company.

If there is a huge downside – for example, a catastrophe risk of the key factors that are needed for success aren’t there or any other disqualifying factors like no sustainable advantage, bad and untrustworthy management of something else – just say ‘no thank you.’

Howard Marks wrote this sometime in 1990 –

The best foundation for above-average long-term performance is the absence of disasters. There will always be cases and years in which, when all goes right, those who take on more risk will do better than we do. In the long run, however, I feel strongly that seeking relative performance which is just a little bit above average on a consistent basis – with protection against poor absolute results in tough times – will prove more effective than ‘swinging for the fences.

So, the important mantra of sensible investing is – If I avoid the losers, the winners will take care of themselves.

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