Montier’s seven immutable laws of investing

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James Montier, a long-time favorite among the readers of Investment Postcards, has just produced a white paper entitled “The Seven Immutable Laws of investing”. In the paper, the GMO strategist presents a set of principles to guide sensible investment.

The principles are:

1. Always insist on a margin of safety

2. This time is never different

3. Be patient and wait for the fat pitch

4. Be contrarian

5. Risk is the permanent loss of capital, never a number

6. Be leery of leverage

7. Never invest in something you don’t understand

Montier concludes as follows: “I hope these seven immutable laws help you to avoid some of the worst mistakes, which, when made, tend to lead investors down the path of the permanent impairment of capital. Right now, I believe the laws argue for caution: the absence of attractively priced assets with good margins of safety should lead investors to raise cash. However, currently it appears as if investors are following Chuck Prince’s game plan that ‘as long as the music is playing, you’ve got to get up and dance’.”

Click here for the full report (free registration is required).

Source: James Montier, GMO, March 2011.

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2 comments to Montier’s seven immutable laws of investing

  • Sherman McCoy

    I’ll put these next to my other great principles such as;

    1) buy low, sell high
    2) never push a loser
    3) nobody ever went broke taking a profit.

    For the edification of anybody new looking at your site, why would anybody follow this guy? Hasn’t he been bearish since 1994, and hasn’t he been a naysayer during the entire 100% rally from the bottom?

  • If you ignore Montier’s laws, you will have to live with the consequences that won’t be to your advantage!

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