Quotessence
Home / Authors / Seth Klarman
Seth Klarman

Seth Klarman Quotes

Author

Filter quotes by topic

AllInvestorsInvestingValuesInvestmentRiskTermLongIfsShouldFinancialLong TermMayKnowsOpportunityReturnWellsLossNeedsWayBargains

Famous Seth Klarman Quotes

“The risk of an investment is described by both the probability and the potential amount of loss. The risk of an investment-the probability of an adverse outcome-is partly inherent in its very nature. A dollar spent on biotechnology research is a riskier investment than a dollar used to purchase utility equipment. The former has both a greater probability of loss and a greater percentage of the investment at stake.”

UsedLossGreaterRiskAmountResearchDollarsInvestmentInvestingFormerOutcomesStakesInherentEquipmentProbabilityPercentagesUtilityAdverseBiotechnology
Author:Seth Klarman
Create image

“In the financial markets, however, the connection between a marketable security and the underlying business is not as clear-cut. For investors in a marketable security the gain or loss associated with the various outcomes is not totally inherent in the underlying business; it also depends on the price paid, which is established by the marketplace. The view that risk is dependent on both the nature of investments and on their market price is very different from that described by beta.”

DifferentLossViewsClearCuttingRiskSecurityDependsGainsConnectionsPaidInvestmentInvestingFinancialVariousOutcomesDependentInvestorsInherentMarketplaceFinancial MarketsBeta
Author:Seth Klarman
Create image

“Unlike return, however, risk is no more quantifiable at the end of an investment that it was at its beginning. Risk simply cannot be described by a single number. Intuitively we understand that risk varies from investment to investment: a government bond is not as risky as the stock of a high-technology company. But investments do not provide information about their risks the way food packages provide nutritional data.”

WayEndsGovernmentNumbersCompanyTechnologyRiskInformationReturnInvestmentInvestingDataPackagesVaryHigh Technology
Author:Seth Klarman
Create image

“Rather, risk is a perception in each investor's mind that results from analysis of the probability and amount of potential loss from an investment. If an exploratory oil well proves to be a dry hole, it is called risky. If a bond defaults or a stock plunges in price, they are called risky. But if the well is a gusher, the bond matures on schedule, and the stock rallies strongly, can we say they weren't risky when the investment after it is concluded than was known when it was made.”

IfsMindWellsMadeLossResultsKnownRiskAmountProvePerceptionInvestmentInvestingOilHolesAnalysisDryInvestorsSchedulesProbabilityPlungeDefault
Author:Seth Klarman
Create image

“There are only a few things investors can do to counteract risk: diversify adequately, hedge when appropriate, and invest with a margin of safety. It is a precisely because we do not and cannot know all the risks of an investment that we strive to invest at a discount. The bargain element helps to provide a cushion for when things go wrong.”

KnowsHelpingCan DoRiskElementsSafetyInvestmentStriveInvestingAppropriateInvestorsMarginsBargainsDiscountsCushionsWhen Things Go Wrong
Author:Seth Klarman
Create image

“Investors frequently benefit from making decisions with less than perfect knowledge and are well rewarded for bearing the risk of uncertainty. The time other investors spend delving into the last unanswered detail may cost them the chance to buy into situations at prices so low they offer a margin of safety despite the incomplete information”

WellsMayLastsChanceDecisionPerfectSituationRiskInformationCostOffersBenefitsLowsSafetyDetailsDespiteUncertaintyInvestorsMarginsIncompleteMaking DecisionsUnansweredDelvingIncomplete Information
Author:Seth Klarman
Create image

“As value investors, our business is to buy bargains that financial market theory says do not exist. We've delivered great returns to our clients for a quarter century-a dollar invested at inception in our largest fund is now worth over 94 dollars, a 20% net compound return. We have achieved this not by incurring high risk as financial theory would suggest, but by deliberately avoiding or hedging the risks that we identified.”

ValuesRiskCenturyTheoryReturnDollarsFinancialFundInvestorsQuartersClientsAvoidingBargainsCompoundsFinancial MarketsInceptionHigh RiskIncurringHedging
Author:Seth Klarman
Create image

“Pressure to produce over the short term - a gun to the head of everyone - encourages excessive risk taking which manifests itself in several ways - fully invested posture at all times, the use of leverage, and a market centric orientation that makes it difficult to stand apart from the crowd and take a long term perspective.”

WayLongUseDifficultTermRiskProducePerspectiveGunPressureCrowdsAll TimeLong TermShort TermOrientationPostureRisk-taking
Author:Seth Klarman
Create image

“Warren Buffett likes to say that the first rule of investing is "Don't lose money," and the second rule is, "Never forget the first rule." I too believe that avoiding loss should be the primary goal of every investor. This does not mean that investors should never incur the risk of any loss at all. Rather "don't lose money" means that over several years an investment portfolio should not be exposed to appreciable loss of principal.”

ShouldYearsFirstsBelieveMeanDoeGoalLosesLossForgetRiskInvestmentInvestingLikesPrimariesNever ForgetInvestorsExposedPrincipalAvoidingPortfoliosBuffettWarren Buffet
Author:Seth Klarman
Create image

“Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return. Conservative positioning entering a crisis is crucial: it enables one to maintain long-term oriented, clear thinking, and to focus on new opportunities while others are distracted or even forced to sell. Portfolio hedges must be in place before a crisis hits. One cannot reliably or affordably increase or replace hedges that are rolling off during a financial crisis.”

ThinkingShouldLongDoeLastsOpportunityTermClearFocusRiskReturnIncreaseCrisisSellsDollarsStriveFinancialProfitConservativeLong TermConsiderationCrucialInvestorsRollingEnteringDistractedFinancial CrisisPortfoliosNew OpportunityBackseatClear Thinking
Author:Seth Klarman
Create image

“Do not accept principal risk while investing short-term cash: the greedy effort to earn a few extra basis points of yield inevitably leads to the incurrence of greater risk, which increases the likelihood of losses and severe illiquidity at precisely the moment when cash is needed to cover expenses, to meet commitments, or to make compelling long-term investments.”

LongMomentsTermLossEffortAcceptingGreaterRiskNeededCommitmentBasesIncreaseInvestmentInvestingLong TermExtrasExpensesYieldCashCompellingPrincipalSevereGreedyShort TermLikelihood
Author:Seth Klarman
Create image

“The government - the ultimate short-term-oriented player - cannot withstand much pain in the economy or the financial markets. Bailouts and rescues are likely to occur, though not with sufficient predictability for investors to comfortably take advantage. The government will take enormous risks in such interventions, especially if the expenses can be conveniently deferred to the future. Some of the price-tag is in the form of back- stops and guarantees, whose cost is almost impossible to determine.”

IfsGovernmentPainFormTermEconomyPlayerImpossibleRiskCostAdvantageUltimateFinancialDetermineEnormousSufficientGuaranteesExpensesInvestorsRescueInterventionShort TermTagFinancial MarketsPredictabilityPrice TagBailouts
Author:Seth Klarman
Create image

“Below, we itemize some of the quite different lessons investors seem to have learned as of late 2009 - false lessons, we believe. To not only learn but also effectively implement investment lessons requires a disciplined, often contrary, and long-term-oriented investment approach. It requires a resolute focus on risk aversion rather than maximizing immediate returns, as well as an understanding of history, a sense of financial market cycles, and, at times, extraordinary patience.”

BelieveWellsLongDifferentSeemsUnderstandingTermFocusRiskReturnLessonsLateApproachInvestmentExtraordinaryFinancialContraryLong TermCyclesInvestorsAversionResoluteFinancial MarketsMaximizingRisk Aversion
Author:Seth Klarman
Create image

“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.”

NeedsLongPhilosophyMightValuesTermResultsPsychologyRiskLimitsToolsIntelligentFundamentalsInvestmentDepthInvestingCrowdsPursueAnalysisLong TermInvestorsComprehensiveBargainsIdentifying
Author:Seth Klarman
Create image