Hedge fund guru Seth Klarman rarely talks with the media, but he recently gave an in-depth interview to Charlie Rose through the group Facing History and Ourselves. And Business Insider has provided a nice summary of the legendary value investor’s wisdom.
Much of his advice focuses on the psychology of value investing. “Investing is the intersection of economics and psychology,” Klarman says. “The economics, the valuation of the business, is not hard. The psychology — How much do you buy? Do you buy it at this price? Do you wait for a lower price? What do you do when it looks like the world might end? Those are the harder things.”
Much of what Klarman says also involves thinking long term and not being deterred by short-term gyrations in stocks. “The only reason we care about gyrations is so we can buy something cheaper,” he says.
“Value investors have to be patient and disciplined,” Klarman adds, “but what I really think is you need to not be greedy.” Greed leads to leverage, he says, and “almost every financial blow up is because of leverage.”