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

by Howard Marks

There, many people tend to fall further in love with the thing they’ve bought as its price rises, since they feel validated, and they like it less

the price falls, when they begin to doubt their decision to buy.

“It’s down so much, I’d better get out before it goes to zero.” That’s the kind of thinking that makes bottoms . . . and causes people to sell there.

serum,

you have to have a view on intrinsic value, and you have to hold that view strongly enough to be able to hang in and buy even as price declines suggest that you’re wrong. Oh yes, there’s a third: you have to be right.

Relationship Between Price and Value

efficacy

Bottom line: there’s no such thing as a good or bad idea regardless of price!

Nifty Fifty investing

stalwart

exogenous

What are the companies worth? Eventually, this is what it comes down to. It’s not enough to buy a share in a good idea, or even a good business. You must buy it at a reasonable (or, hopefully, a bargain) price.

psychology and technicals.

Two examples: the forced selling that takes place when market crashes cause levered investors to receive margin calls and be sold out, and the inflows of cash to mutual funds that require portfolio managers to buy. In both cases, people are forced to enter into securities transactions without much regard for price.

manifestations.

ascertaining

the key to understanding the price/value relationship—and the outlook for it—lies largely in insight...

Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity.

elusive.

conscientious

nugget

rendition

conjure

capitulate

bubbles, “attractive” morphs into “attractive at any price.”

chancy,

infatuation

Benefiting from a rise in the asset’s intrinsic value.

Applying leverage.

Selling for more than your asset’s worth.

But certainly the hoped-for arrival of this sucker can’t be counted on. Unlike having an underpriced asset move to its fair value, expecting appreciation on the part of a fairly priced or overpriced asset requires irrationality on the part of buyers that absolutely cannot be considered dependable.

Buying something for less than its value.

Buying at a discount from intrinsic value and having the asset’s price move toward its value ...

Of all the possible routes to investment profit, buying cheap is clearly the most reliable.

“The market can remain irrational longer than you can remain solvent.”

Trying to buy below value isn’t infallible, but it’s the best chance we have.

The first step consists of understanding it. The second step is recognizing when it’s high.

The critical final step is controlling

it.

level-headed

quantum

attendant,

whether the return on a given

investment justifies takin...

“risk-adjusted return.”

ubiquitous

The correct formulation is that in order to attract

capital, riskier investments have to offer the prospect of higher returns, or higher promised returns, or higher expected returns.

there’s absolutely nothing to say those higher prospective returns...