The job of a professional investor is as much about avoiding disasters as it is about picking winners. Most fund managers can select their share of winners, but what will often differentiate a good portfolio manager from an average one is holding fewer losers than the competitors.

In analysing my worst mistakes over the years, I have identified three recurring factors. They are: poor balance sheets, poor business models and poor managements. Of these three, by far the most common cause of grief has been the poor balance sheet.