This is not a personal attack, but may I respectfully ask how you acquired your knowledge in investing? The lack of investment understanding demonstrated by your post is disturbing enough that I felt compelled to intervene, but I'm not going to spend a lot of time trying to police this thread from future posts that convey misinformation--I just don't have the time.
Let me be blunt: It's academically irresponsible to post on this forum with an air of authority while getting the basics wrong. You wrote that "risk is defined as permanent loss of capital". I would like you to cite your source for this wrong definition. In reality, risk is the
potential for permanent loss of capital.
I then took a good look at the gurufocus site you cited (Prem's results are in a table below a chart called "Total Holding History" here:
Prem Watsa Stock Holdings, Investment Philosophies and News -- GuruFocus.com ). You forgot to mention that Prem lost to the S&P during 8 of the past 20 years. If you had "followed" Prem during 2005, you would have sustained a loss of 18%--that, my friend, would have been a permanent loss of capital. Prem hasn't been able to beat the S&P in 2010, 2011, or 2012--that doesn't impress me at all. If anyone wants to experience the returns you cite then that person would have to exactly mirror Prem's trades--not everyone has the wherewithal to invest that way. So while the numbers might appear alluring to a beginner investor, anyone trying to cherry-pick which years or months to "follow" Prem would be doing so at their own peril. The fact that Prem's last three years didn't beat the S&P makes it really easy for me to beautifully demonstrate my point to everyone here that past performance does not, cannot, and will not predict future results.
Moving on to DELL: It's not wise to find a single example (DELL, in your case) and use that as a basis for one's investing philosophy. There is something to be said for sample size, and your sample size is 1. Even if you increase your sample size, for every example you can cite where averaging-down and averaging-up might have worked, there are just as many other examples where it would not have worked.
Finally, you stated that volatility is not risk. True, they're different words and they have different meanings. But when you truly understand the definitions for each you will then appreciate that volatility
confers risk.
Thank you in advance for reading...