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www.insideHALTON.com | OAKVILLE BEAVER | Thursday, May 5, 2016 | 26 arren Buffett provided some words of wisdom in his recently released annual letters to the shareholders of Berkshire Hathaway. Buffett's comments touched on the four disciplines leading to success in the insurance business and could be applied equally well to investments. Our observation is with most endeavours there is a formula for success. Certain things are fundamental to obtaining success and certain things often lead to failure. For pro table investing, we recommend all investors understand the basics of investing and then have the discipline to invest accordingly. Here are four things to consider: Understand exposures · One -- Understand all exposures that might cause a policy to incur losses. The risk of loss to a long-term investor is the chance you will lose all your money. That is a possibility. It has happened to many people before and it will happen to many people again. You could purchase a stock or bond and the value of that investment could decline to zero. Remember Nortel? The best protection is to own a diversi ed portfolio consisting of many different asset classes. You will still experience volatility, however, it is unlikely a diversi ed portfolio of hundreds, or thousands, of different investments will lose all of its value. Buffett's words of wisdom Dollars & W Sense Guest Contributor Peter Watson classes to give you some understanding of the degree of volatility that has occurred. Studying past volatility of an asset class, for example Canadian stocks or U.S. stocks, gives you some sense of what you might anticipate in the future. Set a premium · Three -- Set a premium that, on average, will deliver a pro t after both prospective loss costs and operating expenses are covered. The key word is pro t. If you have a diversi ed portfolio the probability of a pro t is fairly high, if you continue to hold your investments for the long term. There is risk to investing in just one stock or a concentrated holding of a few stocks because if any one security declines signi cantly in value because of a business failure then you might not have the ability to recover your investment. Diversi cation is key. Follow the principle of safety in numbers and avoid the temptation to invest in just a few securities. Be willing to walk away · Four -- Be willing to walk away if the appropriate premium can't be obtained. There is no such thing as an investment that is too good to be true. Sometimes spesee Heed on p.33 Assess costs · Two -- Conservatively assess the likelihood of any exposure actually causing a loss and the probable cost if it does. In this case, you can let history be your guide. Review the past performance of asset Sewciety Members! DON'T MISS OUR 1 DAY MEMBERS' SALE - SATURDAY, MAY 7 ON ALMOST EVERYTHING IN THE STORE! Not a Member? Join now for 12 full months of savings! Details in-store! Sale in effect May 7, 2016 only, for Sewciety Members only, excluding promotional goods, Details Special Purchases, in-store. Signature StylesTM, yarn and clearance. Full details in-store. OUR REG. PRICE MISSISSAUGA: 3015 WINSTON CHURCHILL BLVD. (N.W. side @ Dundas) 905-828-9966 BURLINGTON: 3515 FAIRVIEW ST. 905-639-2516 Follow us on Facebook & Twitter! www.fabricland.ca