Howard Marks is one of the most insightful investors of our time.
Today, he is worth $2 billion and his from Oaktree Capital has over $160 billion in AUM.
Here are 10 lessons I’ve learned from his brilliant writings:
Today, he is worth $2 billion and his from Oaktree Capital has over $160 billion in AUM.
Here are 10 lessons I’ve learned from his brilliant writings:
1. Investing is Complex
Investing is challenging and takes a lot of time to master.
It’s important to realize just how complex it is. Don't become overconfident in your assumptions or oversimplify how the world works.
Investing is challenging and takes a lot of time to master.
It’s important to realize just how complex it is. Don't become overconfident in your assumptions or oversimplify how the world works.
2. Apply Second-Level Thinking
First-Level Thinking says:
“This is a good company - I’ll buy it.”
Second-Level Thinking says:
“This is a good company, but everyone thinks it is extraordinary – I’ll sell it.”
Learn to apply second-level thinking.
First-Level Thinking says:
“This is a good company - I’ll buy it.”
Second-Level Thinking says:
“This is a good company, but everyone thinks it is extraordinary – I’ll sell it.”
Learn to apply second-level thinking.
3. Efficiency of Markets
It’s safe to assume that markets are largely efficient.
Attempting to outperform in a perfectly efficient market is like flipping a fair coin: the best you can hope for is 50-50.
In order to outperform, you need to do things differently.
It’s safe to assume that markets are largely efficient.
Attempting to outperform in a perfectly efficient market is like flipping a fair coin: the best you can hope for is 50-50.
In order to outperform, you need to do things differently.
4. Risk & Return
Many investors incorrectly assume that increasing their risk will increase their returns.
Instead, increasing your level of risk increases your range of potential outcomes, including the potential for losses.
Higher risk does not always lead to higher returns.
Many investors incorrectly assume that increasing their risk will increase their returns.
Instead, increasing your level of risk increases your range of potential outcomes, including the potential for losses.
Higher risk does not always lead to higher returns.
5. Psychology
Skillful investors can get a sense of the risk present.
Many investors believe that what has gone up recently will continue to go up.
“When people say there’s no price too high for a particular investment - that’s the hallmark of being in a bubble.”
Skillful investors can get a sense of the risk present.
Many investors believe that what has gone up recently will continue to go up.
“When people say there’s no price too high for a particular investment - that’s the hallmark of being in a bubble.”
6. Cycles
Markets move in cycles, and cycles will always exist.
Optimism is followed by pessimism. Companies rise, and many of them eventually fall.
“Ignoring cycles and extrapolating trends is one of the most dangerous things an investor can do.”
Markets move in cycles, and cycles will always exist.
Optimism is followed by pessimism. Companies rise, and many of them eventually fall.
“Ignoring cycles and extrapolating trends is one of the most dangerous things an investor can do.”
7. Ego
Many of the best investors underperform during bull markets and outperform during bear markets.
This requires you to set aside your ego.
You have to accept that in some years, you will have to underperform the market in order to achieve long-term outperformance.
Many of the best investors underperform during bull markets and outperform during bear markets.
This requires you to set aside your ego.
You have to accept that in some years, you will have to underperform the market in order to achieve long-term outperformance.
8. Market Predictions
Making short-term market predictions is a fool's errand.
The best we can do is get a general idea of where we stand in a cycle and act accordingly.
Nobody knows how far irrational investors will take a market up or down at the extremes.
Making short-term market predictions is a fool's errand.
The best we can do is get a general idea of where we stand in a cycle and act accordingly.
Nobody knows how far irrational investors will take a market up or down at the extremes.
9. Finding Bargains
Finding investments that are trading at bargain prices requires you to be a contrarian.
Being a contrarian means you recognize a mispricing when investors are overly bearish.
Finding investments that are trading at bargain prices requires you to be a contrarian.
Being a contrarian means you recognize a mispricing when investors are overly bearish.
10. Be Prepared for Chaos
When the market is panicking, and there is blood in the streets is the best time to buy.
Always be prepared for this.
“Patient opportunism, buttressed by a contrarian attitude and a strong balance sheet, can yield amazing profits during meltdowns.”
When the market is panicking, and there is blood in the streets is the best time to buy.
Always be prepared for this.
“Patient opportunism, buttressed by a contrarian attitude and a strong balance sheet, can yield amazing profits during meltdowns.”
That's it for today.
▪️ Each Tuesday we share 5 investment insights
▪️ Each Thursday we publish a deeper investment article
Start your journey here:
qualitycompounding.substack.com
▪️ Each Tuesday we share 5 investment insights
▪️ Each Thursday we publish a deeper investment article
Start your journey here:
qualitycompounding.substack.com
If you’d like to learn more about Howard Marks, we know you’ll also enjoy @Clay_Finck’s recent episode on @TIP_Network: link.chtbl.com
For those who didn't read it yet, The Most Important Thing from Howard Mark is a must read:
When Howard Marks publishes a new Memo, Warren Buffett drops everything he's doing to read it.
All Memos (> 1500 pages) were mapped in 1 PDF which you can receive for free.
Leave your email address here to receive it:
eepurl.com
All Memos (> 1500 pages) were mapped in 1 PDF which you can receive for free.
Leave your email address here to receive it:
eepurl.com
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