Investment Fundamentals

• Portfolio construction should strike a balance between safety and certainty on the one hand, and aggressiveness and gains-seeking on the other.

• Mindless diversification is not a substitute for intelligent thought.

• Market inefficiencies are the key to opportunity.

• Asset size is critical because opportunities can be exhausted by size.

• Money manager selection involves finding honest, talented people who have a focused skill, and giving them a reasonable amount of money to manage.

• The fee an active manager charges should reflect their unique insights and abilities.

• If you are being paid for risk, you take it. If you are not being paid for risk, you don’t take it. That is why you must always be risk aware – as opposed to just being risk averse.

• Volatility is not a proxy for risk. Risk is (1) the possibility of the permanent loss of capital, and (2) the possibility of not having enough money to fund a future goal.