This from a recent interview with Steve Forbes, which you can watch in full on Forbes.com

But then even buying Treasuries, you have the risk of under-performing inflation at today’s rate that you’re getting on Treasuries, right? Certainly with today’s yield, relative to the stock market, I would think Treasuries would be a terrible investment. In fact, we’re short an ETF that owns 20-year Treasuries because we think rates are going up. My point, though, is you can do one of two things.

Generally speaking, to the extent that you can, you can own bonds and stocks, and then within stocks you can pick stocks on your own or you can own a mutual fund or an index fund. I think that picking stocks and doing better than the market over time is very, very, very difficult. Most professionals can’t do it and most individual investors can’t do it. Human beings are hardwired to do precisely the wrong thing, which is buy things when they’re high and popular, and sell them when they’re low and unpopular. And of course to be a successful investor you have to do the complete opposite. I think most average people, who don’t have the time and the training to pick stocks, would be better off in mutual funds or index funds.

Tilson is right that we are “hardwired” to buy high and sell low. That’s why here at Notes we follow only contrarian investors – those that take advantage of the crowd’s uncanny ability to do the wrong thing when it comes to their money. As our commodities investing guru Rick Rule puts it, “You’re either a contrarian or a victim.” Amen to that…

“[In 2007], there were 1,125 billionaires. This year, it’s down to 793,” says CEO Steve Forbes.

An NPR broadcast tried to put an optimistic spin on the news suggesting, “All those empty spots… mean more room for the rest of us to move up.” In good fun, it even provided five secrets to do so, based upon the business activities that propelled 38 new billionaires into this year’s rankings.

But in all fairness, I don’t think a single one of us stands a chance of becoming a billionaire in the next year. So let’s put the Forbes list to better use than invoking a fanciful daydream about joining the lifestyles of the rich and famous.

Turns out, by focusing on the 10 biggest losers – who lost a combined $238 billion – the list contains four timeless investing lessons we can put to work immediately to prevent a similar disaster (in relative terms, of course).

Lesson #1: Have an Exit Strategy

While some can argue averaging down – buying more shares as prices fall to reduce your average cost per share – is a smart move, it’s stupid if you don’t ever stop. Just ask Carlos Slim Helu. To his detriment, he couldn’t resist buying more of luxury retailer Saks or The New York Times as shares plummeted.

Instead of endlessly throwing good money after bad, cut your losses and move on. It’s hard to do, that’s why we recommend using trailing stops. They take all the emotion out of the decision and provide much needed discipline to exit an investment gone bad… before it gets really bad.

Lesson #2: Don’t Try to Time the Market or Make a Few Big Bets

We know it’s tempting. But even Warren Buffett can’t do it. He admittedly “did some dumb things.” Atop the list is certainly his decision to plunk down $244 million on ConocoPhillips at the top of the oil market. Trying to make a fortune by placing a few big, well-timed bets is a surefire way to lose a fortune, not make one.

Lesson #3: Use Leverage Sparingly… Or Not at All

Russian oligarch Oleg Deripaska needed a $4.5 billion loan from a state-controlled bank to avoid a margin call by Western Banks on his 25% stake in Norilsk Nickel. Other margin calls forced him to raise $2 billion by selling his stakes in Magna International and Hochtief. Leverage might magnify returns on the upside, but don’t forget it does the same thing to losses on the downside. And we’re not as fortunate to have a state-controlled bank to bail us out.

Lesson #4: Asset Allocate

This is akin to our parents telling us to “eat your vegetables.” We know it’s good for us. But that doesn’t mean we necessarily do it. Consider this your annual reminder because without exception, the 10 biggest losers on the Forbes list had almost all their assets in one basket.

Take Anil Ambani for example. His sizeable investment in India’s Reliance companies (Communications, Power and Capital) made him last year’s biggest gainer and this year’s biggest loser, down $32 billion.

Granted, most billionaires can’t simply unwind their biggest investments. In many cases they’re in the business they created and they need to retain a large stake to stay in control.

But we can. So if too much of your portfolio is invested in a single investment, it’s time for a change.

If we don’t invest too much (position size) in any one opportunity and spread our investments around widely (asset allocate), it’s impossible to be wiped out in one fell swoop.

Yes, protection is that simple. And while it might not be that easy for the world’s billionaires, it is for us. So use it.

Forbes’ 10 Biggest Losers: 4 Wealth Protection Lessons From Bankrupt Billionaires