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What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics.

If the prospect of a bad result gets the heart racing - a plane crash, a terrible disease, a loss of 30 percent of your portfolio - most people will take strong steps to avoid it. They will pay too little attention to a comforting thought, which is that worst-case scenarios usually don't come to fruition.

It is important for investors to understand what they do and don't know. Learn to recognize that you cannot possibly know what is going to happen in the future, and any investment plan that is dependent on accurately forecasting where markets will be next year is doomed to failure.

Hundreds of investors ask me questions each year about the dilemmas they confront. Their worst problem? Uncertainty. They are traumatized and become emotional or confused to the state of inaction. Even worse, they try to solve a short-term problem in a way that hurts them financially in the long run.

Investors should invest on what they know. The biggest mistake is to invest on what they don't know.

People often panic when the markets go down and sell off their stocks - but then they aren't in the game when the markets are doing well.

I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy.

The actions taken by central banks and other authorities to stabilize a panic in the short run can work against stability in the long run if investors and firms infer from those actions that they will never bear the full consequences of excessive risk-taking.

A financial crisis is a great time for professional investors and a horrible time for average ones.

I have learned that nothing is certain except for the need to have strong risk management, a lot of cash, the willingness to invest even when the future is unclear, and great people.