The corollary to an institutional investor reaching down for yield in Klarman's quote above for an individual investor is buying a marginally cheap, marginally out of favor big cap. Don't be tempted to settle for marginal. Patience is the HARDEST part of allocating capital. But those that practice it will often be rewarded when everyone else is running for cover.
Don't Chase Hot Markets
I made my biggest mistake last year when the market was soaring as it is now. I could not find anything to buy that met my criteria so I lowered my standards and bought Hewlett Packard. Distressed Debt Investing wrote an excellent piece today about chasing during times when the market is hot. I found the following especially true. From Distressed Debt Investing: