Psychology is probably the most important factor in the market - and one that is least understood.

I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time.

Patience is a crucial but rare investment commodity.

One of the big problems with growth investing is that we can't estimate earnings very well. I really want to buy growth at value prices. I always look at trailing earnings when I judge stocks.

Psychology is probably the most important factor in the market - and one that is least understood.

Favored stocks underperform the market, while out-of-favor companies outperform the market, but the reappraisal often happens slowly, even glacially.

A realistic definition of risk recognizes the potential loss of capital through inflation and taxes, and would include at least the following two factors: The probability that the investment you chose will preserve your capital over the time you intend to invest your funds. The probability the investments you select will outperform alternative investments for this period.