To Provide Some Clarity on the 2 Cardinal Rules

Since there was some confusion about my last post, I figured I may as well clarify things the best I can.

Buffett is not suggesting that it is possible for you to provide 100% assurance against loses. It's all about calculated risks. However, there are some methods that can be used to help reduce the potential for loses (remember the all important principle of margin of safety?).

You've got to read between the lines here. It's really showing you Buffett's view when it comes to investing. Since I know a little more than the average person I'll tell you a few things about him:

- He's not into taking gambles. He likes to invest in companies that are solid and have a proven record of success -- not placing wagers on start-ups.

- He looks for situations where heads he wins, tails he wins too (yes, they exist). If that is not possible, then heads he wins, and tails he doesn't lose much.

- Buffett often remarks that his strategy involves significantly less risk than other methods of investing (and we can all see that it returns significantly more as well).

- Early in his investing career (there are 2 general phases: 1. partnerships, 2. Berkshire Hathaway -- that's a story for another time) he told his shareholders that he planned to achieve a long-term above average return that will likely be made up of 1. returns that approximately equal the average during prosperous periods, and 2. returns that are better than average during down markets (don't lose money!). This would work out to above average returns.

I could list more, but I just got home from an exam and I am tired. And you're probably all tired of this topic already! Have a good night everyone.