Always look at facts and the statistical basis first.

We like to hear good news, so sometimes we trust unreliable sources.  Don't make decisions based on what fits your preconceptions; look at facts and the statistical basis first.

Seek out and stay with the high probability events.

Make sure the majority of your portfolio is geared to offering long-term returns.

When you are investing, by all means look at the daily price shifts for entertainment and mild speculation, but make sure the majority of your portfolio is geared to offering long-term returns.  Over ten or twenty years of conservative investment is far more attractive than a meteoric stock.

Sometimes bad things happen to good people

When you review projects that went wrong, make it a search for the truth - not a search for someone to blame.

The greatest threat to your future financial security

The greatest threat to your future financial security is the loss, over time, in the purchasing power of power currencies.  A dollar today buys less than 5% of what a dollar bought 100 years ago.

Study the fascinating history and theory of money and use this knowledge as a basis in formulating and guiding your investment philosophy.

The world's investment markets are interconnected.

To be a successful investor it wasn't enough to understand a company's market and competitors on its home turf:  you need an appreciation of how foreign companies and economies might affect that company's destiny.

John Templeton 

Why I am interested in stocks?

Stock prices fluctuated wildly while the underlying value of the business was far more stable.  

To be a successful investor you need to have the time to stop and contemplate what's going on.  

MARKET FLUCTUATIONS OF INVESTOR'S PORTFOLIO

Note carefully what Graham is saying here. 

It is not just possible, but probable, that most of the stocks you own will gain at least 50% from their lowest price and lose at least 33% ("equivalent one-third") from their highest price -regardless of which stocks you own or whether the market as a whole goes up or down.

If you can't live with that - or you think your portfolio is somehow magically exempt from it - then you are not yet entitled to call yourself an investor.

Cash is a drag on your portfolio BUT it has a hidden embedded option value.

Cash is a drag on your portfolio, says the conventional wisdom.  Its returns are low and often negative after inflation and taxes.

But cash has a hidden embedded option value.  When markets crash, cash is king.  All of a sudden assets that were being traded at 5 and 10 times the money spent to build them can be had for a fraction of their replacement cost.

Highly leveraged competitors go bankrupt, leaving the field free for the cash-rich company.

Banks won't lend money except to people who don't need it  - such as the companies with AAA credit ratings and people with piles of money in the bank.

In times like these the marketplace is dominated by forced sellers who must turn assets into cash regardless of price.  This is when the investor who has protected his portfolio by being cash-rich is rewarded in spades:  people will literally be beating a path to his door to all but give away what they have in return for just a little bit of that scarce commodity called cash.


Additional note:
Buffett always has cash in Berkshire Hathaway.  In 2008 Global Financial Crisis, many companies approached Buffett as he has plenty of cash which they sought to have badly.

The Complete Investment System

A complete investment system has detailed rules covering these 12 elements:

1. What to buy
2. When to buy it
3. What price to pay
4. How to buy it
5. How much to buy as a percentage of your portfolio
6. Monitoring the progress of your investments
7. When to sell
8. Portfolio structure and the use of leverage
9. Search strategy
10. Protection against systemic shocks such as market crashes
11. Handling mistakes
12. What to do when the system doesn't work

The first test of your system is obviously whether or not it makes you money.  If your system is profitable, you'll be getting a return on your capital.

Buffett and Soros measure their performance against three benchmarks:

1. Have they preserved their capital?
2. Did they make a profit for the year?
3. Did they outperform the stock market as a whole?

The benchmarks you choose will depend on your financial goals.  When you have established your benchmark, you can then measure whether your system is working or not.

Tesco sales growth closer to rivals' levels - Kantar

Tue Aug 14, 2012 8:07am EDT

LONDON, Aug 14 (Reuters) - The rate of sales growth at Tesco
, Britain's biggest retailer, rose closer to the rates
of its rivals in the 12 weeks to Aug. 5, industry data showed on
Tuesday.
    Market researcher Kantar WorldPanel said Tesco's sales
growth accelerated to 3.4 percent in the 12-week period from a
rate of 0.7 percent in similar data from the prior month.
    Sales grew by 6.2 percent at Wal-Mart's Asda,
Britain's No. 2 supermarket chain; by 4.6 percent at J Sainsbury
, the No. 3 player; and by 1.8 percent at Wm Morrison
, the No. 4.
    Kantar said the overall grocery market grew 3.9 percent.
    Tesco's market share was 30.9 percent in the 12 weeks, up
from 30.7 percent reported in the prior month's data and 31.0
percent in the same period last year. 
    "Shoppers might not yet notice it at the tills, but they are
starting to benefit from lower grocery inflation, with prices
now rising at 3.2 percent - the slowest rate for 18 months and a
sign that things are starting to look up," said Kantar retail
analyst Fraser KcKevitt.
    
    Following is a summary of market share and sales. 
                  12 wks to     12 wks to     pct change
                  Aug 5 2012    Aug 7 2011    
                                              
 Total till roll  31,175,890    30,392,490    2.6
 Total grocers    23,797,410    22,909,250    3.9
 Total multiples  23,283,470    22,378,000    4.0
 
    Market share (percent) and change in sales (percent)
                  12 wks to     12 wks to     pct change
                  Aug 5 2012    Aug 7 2011    in sales
 Tesco            30.9          31.0          3.4
 Asda             17.4          17.0          6.2
 Sainsbury        16.5          16.4          4.6
 Morrison         11.7          11.9          1.8
 Co-operative     6.7           7.1           -1.3
 Waitrose         4.5           4.4           7.4
 Aldi             2.9           2.4           26.0
 Lidl             2.8           2.6           11.8
 Iceland          2.0           1.9           7.0

Tesco sales growth closer to rivals' levels - Kantar

How will you protect your portfolio against systemic shocks such as market panics?

The Master Investor has structured his portfolio and investment strategy so that he will survive even the most extreme market conditions.

If the market collapses overnight, will you live to invest another day?  You have to structure your system so that the answer to this question is "Yes!"

The first thing to do is to acknowledge that anything can and will happen in the markets.  Generate several worst-case scenarios in your mind.  Then ask yourself:  if any of these things happened, how would you be affected - and what would you do?

The Master Investor's primary protection is their judicious use of leverage.  Every time the market crashes we hear stories of people who lose their shirt because they were over-leveraged.  The Master Investor simply doesn't get himself into this position.