Seth Klarman Insights

Warren Buffett isn’t the only successful investor who offers us valuable insights. Meet Seth Klarman: He’s not a household name, but he’s well respected in the investment community, recently managing some $30 billion in hedge fund money and having written the seminal book, “Margin of Safety,” that’s out of print but can be found for hundreds of dollars online.

How good an investor is he? Well, he has reportedly only lost money in three of the past 34 years, and his annual return from inception through 2015 is reportedly about 16 percent.

Here are some words of wisdom from Mr. Klarman:

• “Every security or asset is a ‘buy’ at one price, a ‘hold’ at a higher price and a ‘sell’ at some still higher price.”

This is a great reminder that while it may be clear that a certain company is likely to prosper over many years, its stock isn’t necessarily a good buy at all times. For best results, we should aim to buy stocks when they appear undervalued.

• “We continue to adhere to a common-sense view of risk — how much we can lose and the probability of losing it. While this perspective may seem over(ly) simplistic or even hopelessly outdated, we believe it provides a vital clarity about the true risks in investing.”

Many investors focus on the potential upside of an investment without sufficiently considering the possible downside. All companies face risks, and we need to consider them.

• “If someone asked me to invest their money with the goal of turning a quick profit over the next six to 12 months, I’d have no idea how.”

This emphasizes how impossible it is to know what any given stock or the entire market will do over the short term — which is why we should keep any short-term money out of the stock market. Long-term investments in great companies or in the overall market, on the other hand, are likely to increase in value. • “Never stop reading.” Indeed — it’s what the smartest investors do.