Learning from Seth Klarman

Seth Klarman is a highly respected investor, whose 1991 book, “Margin of Safety: Risk-averse value investing strategies for the thoughtful investor,” long out of print, often sells for more than a thousand dollars

online. Klarman’s insights can help us be better investors. Here are some nuggets widely attributed to him:

• “If you can remember that stocks aren’t pieces of paper that gyrate all the time — they are fractional interests in businesses — it all makes sense.”

Many investors forget or never learn that shares of stock in reputable companies are not lottery tickets that might go up or down, but actual stakes in real businesses. Over the long term, shareholders will literally share in the growth or failure of the company.

• “I can buy this thing for a huge fraction of what it’s worth. What am I worried about if it goes down a little bit more?”

Smart investors shouldn’t mess around once they decide a stock is valued attractively enough to buy. Waiting for a slightly better price might mean you lose out on the good price in front of you.

• “Almost every financial blow-up is because of leverage.”

Just as debt (such as from credit cards) can wreck your financial life, borrowing money simply to invest in stocks can also end disastrously.

• “Value investors have to be patient and disciplined, but what I really think is you need to not be greedy.”

You don’t have to buy every stock that’s going up.

• “The single greatest edge an investor can have is a long-term orientation.”

On the opposite end of the spectrum from investors with a longterm outlook are day traders, who often hold various stocks for only a few days — or hours. That’s very risky and often leads to ruin. But even investors who buy into great stocks and sell them after a year or two for a gain may be leaving a lot of money on the table. Consider hanging on to well-performing stocks for many years, as long as they hold your confidence.