The Most Important Thing Illuminated
Remember, your goal in investing isn’t to earn average returns; you want to do better than average. Thus, your thinking has to be better than that of others—both more powerful and at a higher level. Since other investors may be smart, well-informed and highly computerized, you must find an edge they don’t have. You must think of something they have
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also respect the concept of market efficiency, and I believe strongly that mainstream securities markets can be so efficient that it’s largely a waste of time to work at finding winners there.
Howard Marks, Paul Johnson • The Most Important Thing Illuminated
A portfolio can be set up to withstand 99 percent of all scenarios but succumb because it’s the remaining 1 percent that materializes. Based on the outcome, it may seem to have been risky, whereas the investor might have been quite cautious. • Another portfolio may be structured so that it will do very well in half the scenarios and very poorly in
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Investing, like economics, is more art than science. And that means it can get a little messy.
Howard Marks, Paul Johnson • The Most Important Thing Illuminated
Value investors buy stocks (even those whose intrinsic value may show little growth in the future) out of conviction that the current value is high relative to the current price. • Growth investors buy stocks (even those whose current value is low relative to their current price) because they believe the value will grow fast enough in the future to
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Risk means uncertainty about which outcome will occur and about the possibility of loss when the unfavorable ones do.
Howard Marks, Paul Johnson • The Most Important Thing Illuminated
“The market can remain irrational longer than you can remain solvent.”
Howard Marks, Paul Johnson • The Most Important Thing Illuminated
“There’s a big difference between probability and outcome. Probable things fail to happen—and improbable things happen—all the time.” That’s one of the most important things you can know about investment risk.
Howard Marks, Paul Johnson • The Most Important Thing Illuminated
You can’t do the same things others do and expect to outperform. … Unconventionality shouldn’t be a goal in itself, but rather a way of thinking. In order to distinguish yourself from others, it helps to have ideas that are different and to process those ideas differently.