Paul Ferraresi

Following up on Part I…what are some of my core beliefs on investing?
First of all, and I include myself in this, people tend to be impatient. Good investing, especially from an individual standpoint, is where you have the luxury of not having to participate in the market at all times. You can pick and choose the most appropriate times when the odds and probabilities of success are highly in your favor. I try to keep that in mind as a professional investor as well.
It’s only through time and patience that you actually tend to build wealth through the power of compounding of returns. But doing that requires perseverance and saving, which involves sacrifice. One of the things I was most influenced by is the writing of Charles Ellis, who said you win by not losing and your primary objective in investment management is to control risk.
A successful investment requires a great deal of courage. And it requires steady nerves to invest in those areas where the greater opportunities are, even though that’s not where the consensus is, and it’s very lonely. The best opportunities to buy stocks occur when it’s been very hard to pull the trigger and buy, yet, all your disciplines would suggest that is exactly the right thing to do.
With the markets in wild disarray it reminds me of a quote I have been keeping in front of me lately. As Warren Buffett said: “Be fearful when people are greedy and greedy when people are fearful.” We have gotten to the point where it pays to be a bit greedy, because there are some unusual opportunities being created right now.
So when markets are either frothing, or, in a deep trough, keep in mind you can be out in the middle of the ocean and not know what’s ahead, so you need to be prepared for stormy seas. It just provides better ballast to a portfolio in case there are surprises. As much as you think you’ve got it all right at various points in time, you always want to protect yourself.