“I think it’s helpful to take an organized approach to what I call the “twin risks.” What I’m talking about here is the fact that investors have to deal daily with two possible sources of error. The first is obvious: the risk of losing money. The second is a bit more subtle: the risk of missing opportunity. Investors can eliminate either one, but doing so will expose them entirely to the other. So most people balance the two. What should an investor’s normal stance be regarding the two risks: evenly balanced, or favoring one or the other? The answer depends mostly on one’s goals, circumstances, personality and ability to withstand risk (and on the same things with regard to one’s clients, if any). And separate and apart from his normal posture, should the investor alter the balance from time to time? And if so, how? I think investors should try to appropriately adjust their stance if they (a) feel they have the requisite insight and (b) are willing to expend effort and bear the risk of being wrong. They should do this based on where the market is in its cycle. In short, when the market is high in its cycle, they should emphasize limiting the potential for losing money, and when the market is low in its cycle, they should emphasize reducing the risk of missing opportunity.”