“The essential first step in avoiding pitfalls consists of being on the lookout for them. The combination of greed and optimism repeatedly leads people to pursue strategies they hope will produce high returns without high risk; pay elevated prices for securities that are in vogue; and hold things after they have become highly priced in the hope there’s still some appreciation left. Afterwards, hindsight shows everyone what went wrong: that expectations were unrealistic and risks were ignored. But learning about pitfalls through painful experience is of only limited help. The key is to try to anticipate them.”
—Howard Marks.
