The Most Important Thing: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing)

by Howard Marks

Your view of value has to be based on a solid factual and analytical foundation, and it has to be held firmly.

Whereas high quality can be readily apparent, it takes keen insight to detect cheapness. For this reason, investors often mistake objective merit for investment opportunity.

losing money; and thus from eagerness to buy to urgency to sell. The swing of the pendulum causes the herd to buy at high prices and sell at low prices. Thus, being part of the herd is a formula for disaster, whereas contrarianism at the extremes will help to avert losses and lead eventually to success.

wrong.” It can require patience and fortitude to hold positions long enough to be proved right.

Because of differences in correlation, individual investments of the same absolute riskiness can be combined in different ways to form portfolios with widely varying total risk levels.

Rather than just trying to do the right thing, the defensive investor places a heavy emphasis on not doing the wrong thing.

Most years in the markets are good years, but it’s only in the bad years—when the tide goes out—that the value of defense becomes evident.

Few people if any know more than the consensus about what’s going to happen to the economy, interest rates and market aggregates. Thus, the investor’s time is better spent trying to gain a knowledge advantage regarding “the knowable” : industries, companies and securities.