Investors should learn the big lesson from Buffett’s insurance underwriting practices: always think in terms of expected value. Be risk averse but do not be loss averse, that is, do not be afraid to take calculated risks. Investing is not a business in which every investment is profitable. Most investors find this to be decisively true but difficult to accept. If you are obsessed with individual wins and losses, then you will end up being miserable even if your overall portfolio performs well. Occasional losses are part of the game, so diversify prudently to ensure that no single loss has a
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