Howard Marks published a new Memo this week.
If even Warren Buffett drops everything he's doing when Marks publishes a new Memo, shouldn't you?
Here are my key takeaways:
If even Warren Buffett drops everything he's doing when Marks publishes a new Memo, shouldn't you?
Here are my key takeaways:
1. To outperform, you need to do things differently
You can't outperform the market if you follow the crowd.
"If you want to be in the top 5% of money managers, you have to be willing to be in the bottom 5% too."
You can't outperform the market if you follow the crowd.
"If you want to be in the top 5% of money managers, you have to be willing to be in the bottom 5% too."
2. Focus on risk management
Great investing is focusing on risk management first and returns second.
If you can avoid losers, the winners will take care of themselves.
"Rule No 1: never lose money. Rule No 2: never forget rule No 1. " - Warren Buffett
Great investing is focusing on risk management first and returns second.
If you can avoid losers, the winners will take care of themselves.
"Rule No 1: never lose money. Rule No 2: never forget rule No 1. " - Warren Buffett
3. Risk control versus risk avoidance
It's essential to understand the difference between risk control and risk avoidance.
Risk avoidance: not doing anything where the outcome is uncertain
Risk control: declining to take risks that you aren't rewarded for as an investor
It's essential to understand the difference between risk control and risk avoidance.
Risk avoidance: not doing anything where the outcome is uncertain
Risk control: declining to take risks that you aren't rewarded for as an investor
4. You will fail from time to time
For Marks, the question isn't whether you're going to have losers.
The question is how many losers you'll have and how bad they will be compared to your winners.
For Marks, the question isn't whether you're going to have losers.
The question is how many losers you'll have and how bad they will be compared to your winners.
5. The need for winning stocks
All you need in a successful investment career is a few very big winners.
People often say that you can't go broke from taking a profit.
That's true. But you probably won't become very rich either.
All you need in a successful investment career is a few very big winners.
People often say that you can't go broke from taking a profit.
That's true. But you probably won't become very rich either.
6. The role of risk bearing
The more risk you take:
- The higher your expected return
- The larger the range of possible outcomes
- The larger the chance on a bad outcome
That's why you should think about investing like this:
The more risk you take:
- The higher your expected return
- The larger the range of possible outcomes
- The larger the chance on a bad outcome
That's why you should think about investing like this:
7. Fixed Income
In fixed income, the possible range of outcomes is smaller.
From less risky to more risky:
Treasurys > Corporates > High Yield Bonds
In fixed income, the possible range of outcomes is smaller.
From less risky to more risky:
Treasurys > Corporates > High Yield Bonds
8. Equities
Equities are riskier than bonds.
Howard Marks sees the least risk in investing in the United States.
Emerging Markets have the highest risk.
Equities are riskier than bonds.
Howard Marks sees the least risk in investing in the United States.
Emerging Markets have the highest risk.
9. Investment styles
Howard Marks states that successful investing is about avoiding losers instead of going for winners.
In other words: never invest in The Next Big Thing.
Howard Marks states that successful investing is about avoiding losers instead of going for winners.
In other words: never invest in The Next Big Thing.
That's it for today.
If you liked this, you'll LOVE the compilation with all Memos of Howard Marks (> 1,600 pages).
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If you liked this, you'll LOVE the compilation with all Memos of Howard Marks (> 1,600 pages).
Sign up here if you want to receive it for free: eepurl.com
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