I get all of my investing principles from British spy parody movies. For example, I learned a lot from Austin Powers' immortal line, uttered while drowning a man in the toilet: "Who does Number Two work for? Who does Number Two work for?" (Incidentally, did you know that Tom Arnold played the cowboy in the next stall? Crazy, huh?)

Anyway, in that quote, if you replace "Number Two" with "Mr. Market," you have perhaps the most important investing principle of all: Let the market serve you, instead of the other way around. After the recent market crash, I've seen a lot of panic selling. I though this topic was important because the recent crash was a walk in the park compared to real crashes, like those of 1973, 1987, and 2001.

Intestinal fortitude
It's simple. Your investments will fluctuate. You may get lucky sometimes, but you will never, ever be able to pick exact bottoms. In fact, even if your investing thesis is 100% correct, you are guaranteed to suffer turbulence in almost any investment you make. Just because you're buying a dollar for $0.40 doesn't mean panicking sellers won't bid it down to $0.30, leaving you with a 25% paper loss.

If you do not invest with conviction, you are guaranteed to lose money. Why? Think of investing as a roller coaster. Sometimes you're up, sometimes you're down. If you get scared and sell when you're down, you're pretty much guaranteed to take losses, because all investments fluctuate -- your chances of picking an exact bottom are minuscule, and you're almost guaranteed to be underwater on any investment you make, at least in the short run.

Sticking around
Warren Buffett bought 10% of Washington Post (NYSE:WPO) when its stock went from $38 to $16 during the terrible market crash of 1973. He remarked that he bought $10 million worth of stock at around $20 per share, which (I believe) subsequently went down to $16, so it's thought that at one point he was down 20% on his investment. However, that $2 million paper loss eventually led to a nearly $1.3 billion (yes, billion) gain -- and Berkshire Hathaway (NYSE:BRK-A) still holds its stake in Washington Post.

This is an extreme example, but it shows that conviction is perhaps the most important factor in investing. How does one invest with conviction? As Buffett explains in a speech titled "The Superinvestors of Graham-and-Doddsville":

One quick example: The Washington Post Company in 1973 was selling for $80 million in the market. At the time, that day, you could have sold the assets to any one of 10 buyers for not less than $400 million, probably appreciably more. The company owned the Post, Newsweek, plus several television stations in major markets. Those same properties are worth $2 billion now, so the person who would have paid $400 million would not have been crazy.

Now, if the stock had declined even further to a price that made the valuation $40 million instead of $80 million, its beta would have been greater. And to people that think beta measures risk, the cheaper price would have made it look riskier. This is truly Alice in Wonderland. I have never been able to figure out why it's riskier to buy $400 million worth of properties for $40 million than $80 million. ...

You also have to have the knowledge to enable you to make a very general estimate about the value of the underlying businesses. But you do not cut it close. That is what Ben Graham meant by having a margin of safety. You don't try and buy businesses worth $83 million for $80 million. You leave yourself an enormous margin. When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000-pound trucks across it. And that same principle works in investing.

I suggest that anyone who isn't familiar with this text read it, reread it, and then reread it again. Then print it out and stick it in your wallet and reread it whenever you have spare time. The point is, if a stock goes down, it is less risky - but most investors think the opposite is true. Nothing could be more important in investing than the principles of buying assets when the prices go down, having a margin of safety, and having the stomach to sit out the volatility. If you jump off a plane every time there's a patch of turbulence, you won't get to your destination (and you'll see some seriously messy results).

Another wild ride
Another example is USG (NYSE:USG). According to SEC filings, Berkshire owned 6.5 million shares of USG as of March 31, 2001. According to a Bloomberg article, Berkshire purchased those shares during the fourth quarter of 2000, when the average share price was $17.50, down from a high of about $45 per share just a year earlier.

However, USG subsequently filed for Chapter 11 because of asbestos litigation, and the stock hit a low of $2.80 per share -- a nearly 85% drop from the average $17.50 assumed Berkshire purchase price. However, since then, USG shares have rebounded big-time to a recent $49 per share -- I calculate Berkshire's annualized return at 19%, or 280% versus a flat S&P 500.

In closing, I'd like to add one caveat: There's a difference between conviction and stubbornness. If my thesis is proven wrong, there's no shame in selling out. We all make mistakes, but holding on after the story changes isn't conviction -- it's irresponsible investing.

Again, I'd like to invite readers to reread that Buffett quote. Investing with conviction will not only make you a better investor, it will fatten your wallet.

Related Foolishness:

Berkshire Hathaway and USG are Motley Fool Inside Value recommendations. Try any one of our investing services free for 30 days.

Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.