Thursday, September 14, 2006

Seth Klarman Quote of the Day

No crystal ball is required for investment success. Smart investors stick to investments within their circle of competence, with which they are comfortable whose businesses they have the capability to understand. This does not require accurately divining the meaning of the markets pattern. You dont need an opinion on every security. And you dont need to know which way to lean, following every single news development. You simply need, to be meaningfully correct several times a year in order to earn a solid return on capital without excessive risk.

The challenge is to avoid the temptation to speculate, to have justifiable but not unreasonable confidence in your analytical judgements, to demand adequate return for the risks you incur,and to control risk through prudent, but not excessive, diversification and appropriate hedging while avoiding the usage of leverage.

-- Seth Klarman, Baupost Group manager


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