This is one of the best book we have read till date. The book clearly crystallizes how to think about taking investment bets (position sizing), how to reduce risks in investing & speculation. It is one of the rare books which focused on teaching balance between rewards & risks.
Important Points from the book
1. Take size-able bets in life just taking small bets will provide you a better sleep as if you lose it would be nothing but the important point is it won't ever make you rich also
2. Taking size-able risk is necessary to get rich but make sure you don't go bankrupt taking that risk
3. Don't diversify too much as gains & losses will nullify each other
4. Be less greedy to make money - book some profits when you see sudden huge increase in wealth - fear of regret will stop you from booking profits but don't be greedy as consistent streaks of lucks are rare in life
5. Cut losses when you go wrong don't start praying that your losses will recover rather act quickly take some loss and sell out
6. Taking losses is difficult as you have
a) fear of regret what is value recovers - after sometime it actually may but very rarely in short span
of time
b) painful to take losses & most importantly accepting that you were wrong
7. Forecasting is difficult people generally forecast 30 things and 1 goes right and they calmly ignore the remaining 29
8. Humans love security hence they love forecasting the future
9. Humans seeks pattern even in things full on randomness - its difficult to accept lot of things happen due to luck
10. Don't confuse correlation with causation - it might happen Sachin may hit a century every time it rains but that's pure luck not real reason
11. Never be too attached to your idea always evaluate it against new ideas coming your way
12. Optimism Vs Confidence - optimism means expecting the best but confidence means ability to manage the worst - always seek confidence - optimism a lot of time is just hope
13. Disregard what everybody tells you until you have independently verified and thought over it calmly
14. Being against the crowd can cause anxiety especially in investing as your predictions are based on unreliable future
15. Sometimes the crowd can be right but not always
16. Don't average down when something is falling just to lower your cost - ask yourself if you were to be a fresh buyer would you have bought it now at current rates & if the answer is NO then book the loss and move on
17. Future is unknowable - Expect the unexpected - you should prepare yourself to react to its possibilities which van be both advantageous or disadvantageous.