Mastering The Market Cycle: Getting the Odds on Your Side

by Howard Marks

A winning investment philosophy can be created only through the combination of a number of essential elements: A technical education in accounting, finance and economics provides the foundation: necessary but far from sufficient. A view on how markets work is important—you should have one before you set out to invest, but it must be added to, questioned, refined and reshaped as you proceed. Some of your initial views will come from what you’ve read, so reading is an essential building block. Continuing to read will enable you to increase the efficacy of your approach—both embracing those ideas you find appealing and discarding those you don’t. Importantly, it’s great to read outside the strict boundaries of investing. Legendary investor Charlie Munger often points to the benefits of reading broadly; history and processes in other fields can add greatly to effective investment approaches and decisions. Exchanging ideas with fellow investors can be an invaluable source of growth. Given the non-scientific nature of investing, there’s no such thing as being finished with your learning, and no individual has a monopoly on insight. Investing can be solitary, but I think those who practice it in solitude are missing a lot, both intellectually and interpersonally. Finally, there really is no substitute for experience. Every year I have come to view investing differently, and every cycle I’ve lived through has taught me something about how to cope with the next one. I recommend a l...