- the more debt you have the narrower the range of volatile outcomes you can endure;
- you get paid for two things in investing; firstly mis-pricing and secondly the endurance of volatility;
- a combination of equity and debt gives you the benefit of a bigger and combined size of assets on which you can enjoy the upside of appreciation;
- the more you bet, the more you win when you win;
- volatility plus leverage equals dynamite: the more leverage you have the more you get into trouble and the more volatile the assets you buy with the leveraged funds, the more you get into trouble and as such the combination of the two can really be fatal;
- a highly leveraged capital structure cannot co-exist with highly volatile assets. If you want to buy volatile assets your capital structure should be conservative and if you want to use a lot of leverage you should buy conservative assets;
- choose optimizing over maximizing;
- the riskiest thing in the world is to believe that they is no risk. Risk is self-reinforcing;
- when greedy and prudence fight, greedy often wins so one needs to be mature to deliberately assert some prudence to balance the greedy;
- risk avoidance usually results in return avoidance. It’s risk management and not risk avoidance; and
- the willingness to live with some losses is an essential ingredient in investment success.
