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The release of Warren Buffett’s letter to Berkshire Hathaway shareholders Saturday is a good time to remember the advice of his business partner Charlie Munger who once said “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

Mr. Munger‘s overriding point was that over the long term, investors are rewarded for playing it safe (or passive) rather than attempting to outsmart the market by taking big risk and swinging for the fences.

The Of Dollars and Data investing site further elaborated on this theme in a Feb. 18 post called “Why Avoiding Bad Decisions is More Important Than Making Great Decisions”.

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The column starts by noting that in the tortoise and the hare fable, it was hare’s bad decision making – having a nap - that caused the result rather than anything great the tortoise did. The tortoise won by not screwing up.

The author Nick Maggiulli goes on to write, “Investing is a loser’s game, because most investors who attempt to beat the market typically underperform in the long run… The better strategy for investors then is not to try and win, but to not lose…The warning … is crystal clear: avoid the zeros. Avoid them at all costs.”

In this terminology, zeroes take many forms with high fees, taxes, leverage and divorce mentioned as examples. But in each case the negative outcomes are the same – a large unexpected financial loss that interrupts the compound annual growth of portfolios, the process which creates wealth over the long term.

The temptation to buy a speculative stock in hopes of the vaunted 10-bagger (a stock that increases 10 times in value) is strong in every investor, at least at times. Investors, however, should avoid the temptation and the risk of putting up a zero, winning with patience over the long term.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

The Rundown

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Carnival, United Airlines and more: What a $1.5-billion fund manager is buying amid the spread of coronavirus

While some investors are bailing on travel and tourism stocks amid the spread of the coronavirus, David LePoidevin is buying. Mr. LePoidevin, senior vice-president and portfolio manager at Canaccord Genuity Wealth Management who investors for high-net worth clients, is snapping up names such as cruise-ship operator Carnival Corp., United Airlines Holdings Inc. and MGM Resorts International. The Globe and Mail spoke to Mr. LePoidevin about what he’s been buying and selling in today’s market environment.

Also see: Warren Buffett calls coronavirus outbreak ‘scary,’ but says he won’t be selling stocks

My dividend portfolio is surging – now it’s time to go shopping

Reinvesting dividends is key component of John Heinzl’s investing strategy. Read about his latest addition to his dividend growth portfolio.

Others (for subscribers)

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Monday’s analyst upgrades and downgrades: Goldman says it’s time to sell Enbridge

Monday’s Insider Report: Executives unload millions worth of shares

Globe Advisor

Five bad investor traits – and how to correct them

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

What’s up in the days ahead

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Monday’s brutal selloff in stocks may be leaving some bargains in its wake. We’ll have suggestions on where to find them.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

Click here share your view of our newsletter and give us your suggestions.

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

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Compiled by Globe Investor Staff

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