market folly

Market strategist Jeff Saut's latest weekly commentary is entitled "Losses?!" where he focuses on, you guessed it, the importance of managing the red side of your portfolio.  Saut says,

"What determines your stock market performance is not how you manage your winners, but how you manage your losers."

He then cites legendary hedge fund manager Paul Tudor Jones of Tudor Investment Corp, who said that: "I'm always thinking about losing money as opposed to making money; focus on protecting what you have."

Warren Buffett's rules of investing echo these same sentiments and are succinctly summarized as follows:

"Rule number one: never lose money.  Rule number two: never forget rule number one."

What's interesting is that these three investors/traders all have very different approaches, yet they're still preaching the same message.  Saut is more of an active investor, Tudor Jones is a trader, and Buffett is more of a 'buy and hold' investor.  Yet, despite their differences, they all follow this same discipline.

So many times, investors are focused on their winners and the potential upside in an investment.  Great investors, on the other hand, focus on the downside and managing their losers.


Embedded below is Saut's latest market commentary:




You can download a .pdf copy here.

For more from this strategist, we recently posted up Saut's presentation on current economic takeaways.