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"This is that rarity, a useful book."--Warren Buffett Howard Marks, the chairman and cofounder of Oaktree Capital Management, is renowned for his insightful assessments of market opportunity and risk. After four decades spent ascending to the top of the investment management profession, he is today sought out by the world's leading value investors, and his client memos brim "This is that rarity, a useful book."--Warren Buffett Howard Marks, the chairman and cofounder of Oaktree Capital Management, is renowned for his insightful assessments of market opportunity and risk. After four decades spent ascending to the top of the investment management profession, he is today sought out by the world's leading value investors, and his client memos brim with insightful commentary and a time-tested, fundamental philosophy. Now for the first time, all readers can benefit from Marks's wisdom, concentrated into a single volume that speaks to both the amateur and seasoned investor. Informed by a lifetime of experience and study, The Most Important Thing explains the keys to successful investment and the pitfalls that can destroy capital or ruin a career. Utilizing passages from his memos to illustrate his ideas, Marks teaches by example, detailing the development of an investment philosophy that fully acknowledges the complexities of investing and the perils of the financial world. Brilliantly applying insight to today's volatile markets, Marks offers a volume that is part memoir, part creed, with a number of broad takeaways. Marks expounds on such concepts as "second-level thinking," the price/value relationship, patient opportunism, and defensive investing. Frankly and honestly assessing his own decisions--and occasional missteps--he provides valuable lessons for critical thinking, risk assessment, and investment strategy. Encouraging investors to be "contrarian," Marks wisely judges market cycles and achieves returns through aggressive yet measured action. Which element is the most essential? Successful investing requires thoughtful attention to many separate aspects, and each of Marks's subjects proves to be the most important thing.


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"This is that rarity, a useful book."--Warren Buffett Howard Marks, the chairman and cofounder of Oaktree Capital Management, is renowned for his insightful assessments of market opportunity and risk. After four decades spent ascending to the top of the investment management profession, he is today sought out by the world's leading value investors, and his client memos brim "This is that rarity, a useful book."--Warren Buffett Howard Marks, the chairman and cofounder of Oaktree Capital Management, is renowned for his insightful assessments of market opportunity and risk. After four decades spent ascending to the top of the investment management profession, he is today sought out by the world's leading value investors, and his client memos brim with insightful commentary and a time-tested, fundamental philosophy. Now for the first time, all readers can benefit from Marks's wisdom, concentrated into a single volume that speaks to both the amateur and seasoned investor. Informed by a lifetime of experience and study, The Most Important Thing explains the keys to successful investment and the pitfalls that can destroy capital or ruin a career. Utilizing passages from his memos to illustrate his ideas, Marks teaches by example, detailing the development of an investment philosophy that fully acknowledges the complexities of investing and the perils of the financial world. Brilliantly applying insight to today's volatile markets, Marks offers a volume that is part memoir, part creed, with a number of broad takeaways. Marks expounds on such concepts as "second-level thinking," the price/value relationship, patient opportunism, and defensive investing. Frankly and honestly assessing his own decisions--and occasional missteps--he provides valuable lessons for critical thinking, risk assessment, and investment strategy. Encouraging investors to be "contrarian," Marks wisely judges market cycles and achieves returns through aggressive yet measured action. Which element is the most essential? Successful investing requires thoughtful attention to many separate aspects, and each of Marks's subjects proves to be the most important thing.

30 review for The Most Important Thing: Uncommon Sense for the Thoughtful Investor

  1. 4 out of 5

    Marcelo Bahia

    Although not a totally useless book, it’s a disappointing read. Disappointing due to my high expectations given Howard Marks' track record and his very interesting memos to Oaktree clients. To be honest, depending on your case, this can be a 2-star or a 5-star book - I’m rating it a “3” to try to be fair on the whole universe of people reading this. If you're a beginner in the investing camp and still doesn't have much knowledge on the subject, this is a 5-star primer on how a good experienced in Although not a totally useless book, it’s a disappointing read. Disappointing due to my high expectations given Howard Marks' track record and his very interesting memos to Oaktree clients. To be honest, depending on your case, this can be a 2-star or a 5-star book - I’m rating it a “3” to try to be fair on the whole universe of people reading this. If you're a beginner in the investing camp and still doesn't have much knowledge on the subject, this is a 5-star primer on how a good experienced investor actually thinks. The fact that it’s short and written in simple English is a bonus for starters as well. But if you’re either a professional or an amateur who has already some investing experience and reading background, you will be, like me, frustrated. There’s nothing in here that you haven’t seen before in the classics of Graham, Buffett and Klarman or in books by Taleb, Montier and Mauboussin. What you actually get is a summary of all of them rewritten in the clear and witty “Howard Marks writing style” - if you’re familiar with his memos, you already know that, like Buffett, he has the incredible ability of expressing complex things in a perfectly understandable manner. This may add value to you, if his intelligent and simple way of saying things help you to reinforce the important concepts in investing. Still, a relevant negative is that the text is VERY repetitive. Both within and among chapters. I had the sense that some chapters could be easily reduced to 25% of their actual size without compromising the message (but of course the smaller size would compromise the book as a whole commercially speaking!). And clearly the book could be reduced even more if the author did not repeat the most important concepts all over again in more than half a dozen chapters throughout the book. So my recommendation to you is clear: if you’re a seasoned investor who’s looking for the next useful and money-making read, skip this book without regret. But if you see value in a recap of the “best of the best” or you’re just starting on investing, give it a quick read.

  2. 5 out of 5

    Zak

    The version I read is actually titled 'The Most Important Thing Illuminated' but I don't see it here on Goodreads. It is actually a reissue of the earlier book, this time with annotated comments from Christopher Davis, Joel Greenblatt, Paul Johnson and Seth Klarman. Greenblatt and Klarman are contemporary value investing legends familiar to many people. I can't say that the comments really add much to the original text though. If you pay enough attention to what Marks himself says, you could pro The version I read is actually titled 'The Most Important Thing Illuminated' but I don't see it here on Goodreads. It is actually a reissue of the earlier book, this time with annotated comments from Christopher Davis, Joel Greenblatt, Paul Johnson and Seth Klarman. Greenblatt and Klarman are contemporary value investing legends familiar to many people. I can't say that the comments really add much to the original text though. If you pay enough attention to what Marks himself says, you could probably do just as well with the original version. After two decades in the financial industry and having devoured scores of books on investing / trading, I can say with almost absolute certainty that there is no magic "silver bullet" for investment success (at least not of the type that lasts). Which is why this book resonates with me, because Marks offers no fancy formulae for assured astronomical market profits but instead goes back to the basics and underlines the key principles to adhere to for financial longevity. Yes, I say principles (plural) as there is no ONE most important thing revealed as the title suggests, but in fact, 21 of them (lol). Moving on from this slight transgression for which I totally forgive him, I would say that he has managed to lay out, in a highly accessible manner, a solid foundation for staying in the game and letting the magic of compounding do its work. The main gist of it revolves around avoiding large losses or being wiped out completely (you can't win if you can't play). This is extremely important due to the asymmetrical relationship between gains vs losses (for eg. it will take a 100% gain to recover from a 50% loss). A huge drawdown in any one year can really wreck years of compounded returns. How to avoid this is largely through being constantly aware of where we currently are in the market cycle, adjusting our risk/return tradeoffs accordingly and having the courage and resources (preserved by avoiding large losses) to go against the crowd at extreme ends of the investor psychology pendulum. This necessarily entails never participating when asset prices diverge too much from intrinsic value (unless you plan to go short), no matter how enticing an opportunity might seem (of course, this is when price > value. On the flip side, a wide divergence of value > price would be the time to jump in and buy). I highly recommend reading this book first if you are thinking of taking your investments into your own hands for the first time. These are everlasting principles from which even seasoned investors/traders would benefit to be reminded of from time to time.

  3. 5 out of 5

    Mike

    More of 3.5 stars, which was disappointing given how insightful his memos are and his outstanding investment performance over a long time frame. I follow Oaktree on Twitter so I never miss one of his memos again. A review by "Max" in May 2015 sums it up extremely well and is quoted below. One outstanding illustration he shows is in the Understanding Risk chapter (fig 5.2). Risk / reward is not merely a positive sloping line, you must include the greater uncertainty that comes from higher risk - i More of 3.5 stars, which was disappointing given how insightful his memos are and his outstanding investment performance over a long time frame. I follow Oaktree on Twitter so I never miss one of his memos again. A review by "Max" in May 2015 sums it up extremely well and is quoted below. One outstanding illustration he shows is in the Understanding Risk chapter (fig 5.2). Risk / reward is not merely a positive sloping line, you must include the greater uncertainty that comes from higher risk - including the possibility of losses. Marks shows the positively sloping line with a series of bell-shaped distributions along it, which get larger/wider the further out the risk curve you go. Best visualization of risk that I have seen. "Risk means more things can happen than will happen." From Max's review: "But ultimately I think the memos themselves are significantly better. You can see that somewhat in the book, which includes extensive quotes from the memos, and those quotes are the best part of the book. But another reason is that the memos place those thoughts in an important context, the time and investment environment in which they were written. And they tended to do a better job of linking his general concepts to specific examples (basically whatever was going on at the time, that prompted him to write on that topic at that moment). So even though reading all his memos would not be as organized, I think it would ultimately be time better spent. they are all available on Oaktree's website, I believe. One additional comment on the "Illuminated" version, which includes interspersed comments from Marks as well as other luminaries including Seth Klarman and Joel Greenblatt. These make the book worse! For starters it is probably very hard to improve an existing text with interspersed comments. Second, they are not long enough to be interesting (if one of them wrote a few pages in response to some thought in the book, that would have been much more interesting I believe). Third, they interrupt the flow of the book (that could have been solved by making them footnotes instead of breaking up the text with them). And finally, many of the comments are essentially applause ("well said!" "this is a particularly important point!" "Marks really hits the nail on the head with this paragraph!" etc...). Not every commentator does that equally (Klarman and Greenblatt do less of it) but it really give the book a weird vibe, like it has a piped in applause track. I recommend the non-illuminated version."

  4. 5 out of 5

    ScienceOfSuccess

    This book is based on 20 notes Howard Marks left for his team in Oaktree Capital -global asset management firm. All of them started with "the most important thing...." and every chapter is short and informative. I really liked it for the different point of view on the same mantras like "buy low sell high" etc. Would read again for sure :) This book is based on 20 notes Howard Marks left for his team in Oaktree Capital -global asset management firm. All of them started with "the most important thing...." and every chapter is short and informative. I really liked it for the different point of view on the same mantras like "buy low sell high" etc. Would read again for sure :)

  5. 4 out of 5

    Max Stone

    I'm giving it 4 stars because I think that is probably objectively what it deserves, but really I was disappointed in this book, since I love Howard Marks' investment letters and had high expectations for a 5 star read. This book is based on his investment memos. That's a good thing, since that is where he has collected his (very significant) investment wisdom over the years. And there are some good aspects of that, mostly that he can try to organize the many thoughtful things he has written int I'm giving it 4 stars because I think that is probably objectively what it deserves, but really I was disappointed in this book, since I love Howard Marks' investment letters and had high expectations for a 5 star read. This book is based on his investment memos. That's a good thing, since that is where he has collected his (very significant) investment wisdom over the years. And there are some good aspects of that, mostly that he can try to organize the many thoughtful things he has written into a single book representing what he thinks is most important, in a logical order, etc. But ultimately I think the memos themselves are significantly better. You can see that somewhat in the book, which includes extensive quotes from the memos, and those quotes are the best part of the book. But another reason is that the memos place those thoughts in an important context, the time and investment environment in which they were written. And they tended to do a better job of linking his general concepts to specific examples (basically whatever was going on at the time, that prompted him to write on that topic at that moment). So even though reading all his memos would not be as organized, I think it would ultimately be time better spent. they are all available on Oaktree's website, I believe. One additional comment on the "Illuminated" version, which includes interspersed comments from Marks as well as other luminaries including Seth Klarman and Joel Greenblatt. These make the book worse! For starters it is probably very hard to improve an existing text with interspersed comments. Second, they are not long enough to be interesting (if one of them wrote a few pages in response to some thought in the book, that would have been much more interesting I believe). Third, they interrupt the flow of the book (that could have been solved by making them footnotes instead of breaking up the text with them). And finally, many of the comments are essentially applause ("well said!" "this is a particularly important point!" "Marks really hits the nail on the head with this paragraph!" etc...). Not every commentator does that equally (Klarman and Greenblatt do less of it) but it really give the book a weird vibe, like it has a piped in applause track. I recommend the non-illuminated version. All that said, I think Howard Marks is smart/wise/thoughtful/perceptive/learned and this book is worth reading. It just isn't as great as his 5-star memos.

  6. 5 out of 5

    Eugene

    Lovely book full of wisdom about investments and the decision making. not much about financial calculations but more the psychology , economical cycles, estimates, behavior of the market, risk management, how best investors think, about the difference between loser's game and winner's game, difference between offense and defense. Made highlights on almost every page. Lovely book full of wisdom about investments and the decision making. not much about financial calculations but more the psychology , economical cycles, estimates, behavior of the market, risk management, how best investors think, about the difference between loser's game and winner's game, difference between offense and defense. Made highlights on almost every page.

  7. 5 out of 5

    Francisco

    If you know most of these concepts and principles, in the context of investing: -market efficiency; -value investments (as opposed to growth investments); -good investments are those whose price is below their intrinsic value; -risk, to most investors, has more to do with risk of losing money than with price volatility; -participating in the market when prices are high and rising is the main source of risk; -risk can't be eliminated, but it should be controlled; -it's difficult, if not possible, If you know most of these concepts and principles, in the context of investing: -market efficiency; -value investments (as opposed to growth investments); -good investments are those whose price is below their intrinsic value; -risk, to most investors, has more to do with risk of losing money than with price volatility; -participating in the market when prices are high and rising is the main source of risk; -risk can't be eliminated, but it should be controlled; -it's difficult, if not possible, to predict the timing of market cycles, but one should prepare for them; -contrarianism; then don't read this book. You won't learn anything. Otherwise, it might be worth your time. It's only 180-pages long anyway. My main complaint is that the book is not technical or specific enough. It's a list of generalities corresponding to the value-oriented philosophy of investing.

  8. 4 out of 5

    Russ

    I only expect to find one thing in books like these that I can positively apply to my life or business. As a Registered Investment Advisor, my expectations for this book were high. The author has a long history of success in investing other people's money. The problem with this book is that it betrays all of his insecurities with endless references to Warren Buffet, Wharton and risk aversion. He does not understand the practical use of technical analysis, derides it but ends up using it in to se I only expect to find one thing in books like these that I can positively apply to my life or business. As a Registered Investment Advisor, my expectations for this book were high. The author has a long history of success in investing other people's money. The problem with this book is that it betrays all of his insecurities with endless references to Warren Buffet, Wharton and risk aversion. He does not understand the practical use of technical analysis, derides it but ends up using it in to select securities (or avoid overpriced ones). It is one of his several hypocrisies that he doesn't realize. However, if you are new to investing and only want to match the market's return over a long period of time, you may get more out of this book than I did. I did find one profitable thing to take away from the book and I plan to modify and use it in my practice. This saved the book from getting only one star.

  9. 5 out of 5

    Massgreen

    This is not a how-to book that provides step-by-step investment guides but rather Howard's investment philosophy that he adheres to in his decades of investing. Overall, there are a whole lot of discussions on risks and by that it should convince why investors should invest defensively by requiring enough margin of safety because the future developments may unfold in unexpected and unfavorable ways. Warning: There are a few concepts being repeatedly told within and among chapters. That being said This is not a how-to book that provides step-by-step investment guides but rather Howard's investment philosophy that he adheres to in his decades of investing. Overall, there are a whole lot of discussions on risks and by that it should convince why investors should invest defensively by requiring enough margin of safety because the future developments may unfold in unexpected and unfavorable ways. Warning: There are a few concepts being repeatedly told within and among chapters. That being said, this is a very repetitive book in text, for example sometimes two adjacent paragraphs can tell almost exactly the same thing without adding much new content. Important concepts are: 1. UNDERSTANDING MARKET EFFICIENCY (AND ITS LIMITATIONS) The key turning point in my investment management career came when I concluded that because the notion of market efficiency has relevance, I should limit my efforts to relatively inefficient markets where hard work and skill would pay off best. 2. CONDEMNATION OF MOMENTUM INVESTING The way I see it, day traders considered themselves successful if they bought a stock at $10 and sold at $11, bought it back the next week at $24 and sold at $25, and bought it a week later at $39 and sold at $40. If you can’t see the flaw in this— that the trader made $3 in a stock that appreciated by $30— you probably shouldn’t read the rest of this book. 3. VALUE APPROACH IN INVESTING Of all the possible routes to investment profit, buying cheap is clearly the most reliable. Even that, however, isn’t sure to work. You can be wrong about the current value. Or events can come along that reduce value. Or deterioration in attitudes or markets can make something sell even further below its value. Or the convergence of price and intrinsic value can take more time than you have; as John Maynard Keynes pointed out, “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. 4. UNDERSTANDING RISK Risk means uncertainty about which outcome will occur and about the possibility of loss when the unfavorable ones do. 5. RECOGNIZING RISK Investment risk comes primarily from too-high prices, and too-high prices often come from excessive optimism and inadequate skepticism and risk aversion. • When everyone believes something is risky, their unwillingness to buy usually reduces its price to the point where it’s not risky at all. Broadly negative opinion can make it the least risky thing, since all optimism has been driven out of its price. • And, of course, as demonstrated by the experience of Nifty Fifty investors, when everyone believes something embodies no risk, they usually bid it up to the point where it’s enormously risky. No risk is feared, and thus no reward for risk bearing— no “risk premium”— is demanded or provided. That can make the thing that’s most esteemed the riskiest. This paradox exists because most investors think quality, as opposed to price, is the determinant of whether something’s risky. But high quality assets can be risky, and low quality assets can be safe. It’s just a matter of the price paid for them. . . . Elevated popular opinion, then, isn’t just the source of low return potential, but also of high risk. 6. CONTROLLING RISK Bottom line: risk control is invisible in good times but still essential, since good times can so easily turn into bad times. Most observers think the advantage of inefficient markets lies in the fact that a manager can take the same risk as a benchmark, for example, and earn a superior rate of return. This manager has done a good job, but I think this is only half the story— and for me the uninteresting half. An inefficient market can also allow a skilled investor to achieve the same return as the benchmark while taking less risk, and I think this is a great accomplishment (figure 7.2). Here the manager’s value added comes not through higher return at a given risk, but through reduced risk at a given return. This, too, is a good job— maybe even a better one. Of course, when markets are stable or rising, we don’t get to find out how much risk a portfolio entailed. That’s what’s behind Warren Buffett’s observation that other than when the tide goes out, we can’t tell which swimmers are clothed and which are naked. The road to long-term investment success runs through risk control more than through aggressiveness. Over a full career, most investors’ results will be determined more by how many losers they have, and how bad they are, than by the greatness of their winners. Skillful risk control is the mark of the superior investor. ~~~~~~~~~~ This is so true, when people go burst, they really go burst. Think of it as Texas Poker that we play online, who doesn't win big money at some point in time? But when you lose and start betting aggressively again and again, you will go burst soon, i.e. your result will be determined by how many losers you have, and how bad they are, than by the greatness of your winners. ~~~~~~~~~~~ 7. BEING ATTENTIVE TO CYCLES Every once in a while, an up- or down-leg goes on for a long time and/or to a great extreme and people start to say “this time it’s different.” They cite the changes in geopolitics, institutions, technology or behavior that have rendered the “old rules” obsolete. They make investment decisions that extrapolate the recent trend. And then it turns out that the old rules do still apply, and the cycle resumes. In the end, trees don’t grow to the sky, and few things go to zero. Rather, most phenomena turn out to be cyclical. “You Can’t Predict. You Can Prepare,” November 20, 2001 There are a few things of which we can be sure, and this is one: Extreme market behavior will reverse. Those who believe that the pendulum will move in one direction forever— or reside at an extreme forever— eventually will lose huge sums. Those who understand the pendulum’s behavior can benefit enormously. 8. BE A CONTRARIAN IN FINDING BARGAINS Fairly priced assets are never our objective, since it’s reasonable to conclude they’ll deliver just fair returns for the risk involved. And, of course, overpriced assets don’t do us any good. Our goal is to find underpriced assets. Where should we look for them? A good place to start is among things that are: • little known and not fully understood; • fundamentally questionable on the surface; • controversial, unseemly or scary; • deemed inappropriate for “respectable” portfolios; • unappreciated, unpopular and unloved; • trailing a record of poor returns; and • recently the subject of disinvestment, not accumulation. To boil it all down to just one sentence, I’d say the necessary condition for the existence of bargains is that perception has to be considerably worse than reality. That means the best opportunities are usually found among things most others won’t do. After all, if everyone feels good about something and is glad to join in, it won’t be bargain-priced. Investment bargains needn’t have anything to do with high quality. In fact, things tend to be cheaper if low quality has scared people away. 9. PATIENT OPPORTUNISM You simply cannot create investment opportunities when they’re not there. The dumbest thing you can do is to insist on perpetuating high returns— and give back your profits in the process. If it’s not there, hoping won’t make it so. When prices are high, it’s inescapable that prospective returns are low (and risks are high). 10. THE MACRO FUTURE IS, BY AND LARGE, UNKNOWABLE, BUT YOU MUST HAVE A SENSE FOR WHERE WE STAND IN A CYCLE Investors who feel they know what the future holds will act assertively: making directional bets, concentrating positions, levering holdings and counting on future growth— in other words, doing things that in the absence of foreknowledge would increase risk. On the other hand, those who feel they don’t know what the future holds will act quite differently: diversifying, hedging, levering less (or not at all), emphasizing value today over growth tomorrow, staying high in the capital structure, and generally girding for a variety of possible outcomes. The first group of investors did much better in the years leading up to the crash. But the second group was better prepared when the crash unfolded, and they had more capital available (and more-intact psyches) with which to profit from purchases made at its nadir. “Touchstones,” November 10, 2009 11. INVEST DEFENSIVELY BY COMMANDING A LARGE MARGIN OF SAFETY AND PREPARE FOR UNTOWARD DEVELOPMENT The critical element in defensive investing is what Warren Buffett calls “margin of safety” or “margin for error.” It’s not hard to make investments that will be successful if the future unfolds as expected. There’s little mystery in how to profit under the assumption that the economy will go a certain way and particular industries and companies will do better than others. Tightly targeted investments can be highly successful if the future turns out as you hope. But you might want to give some thought to how you’ll fare if the future doesn’t oblige. In short, what is it that makes outcomes tolerable even when the future doesn’t live up to your expectations? The answer is margin for error. I don’t think many investment managers’ careers end because they fail to hit home runs. Rather, they end up out of the game because they strike out too often— not because they don’t have enough winners, but because they have too many losers. And yet, lots of managers keep swinging for the fences. • They bet too much when they think they have a winning idea or a correct view of the future, concentrating their portfolios rather than diversifying. • They incur excessive transaction costs by changing their holdings too often or attempting to time the market. • And they position their portfolios for favorable scenarios and hoped-for outcomes, rather than ensuring that they’ll be able to survive the inevitable miscalculation or stroke of bad luck. At Oaktree, on the other hand, we believe firmly that “if we avoid the losers, the winners will take care of themselves.” That’s been our motto since the beginning, and it always will be. We go for batting average, not home runs. We know others will get the headlines for their big victories and spectacular seasons. But we expect to be around at the finish because of consistent good performance that produces satisfied clients. “What’s Your Game Plan?” September 5, 2003 ~~~~~~~~~~~~~~~ Charles Ellis even likens investing to amateur's tennis, where amateurs win by not hitting losers rather than hitting winners like professionals in his article "The Loser's Game". ~~~~~~~~~~~~~~~ 12. ADDING VALUE TO PORTFOLIO BY OUTPERFORMING IN BULLISH MARKET AND/OR LOSING LESS IN BEARISH MARKET. AND, OAKTREE'S ASPIRATION ERR ON THE SIDE OF DEFENSE Here’s how I describe Oaktree’s performance aspirations: In good years in the market, it’s good enough to be average. Everyone makes money in the good years, and I have yet to hear anyone explain convincingly why it’s important to beat the market when the market does well. No, in the good years average is good enough. There is a time, however, when we consider it essential to beat the market, and that’s in the bad years. Our clients don’t expect to bear the full brunt of market losses when they occur, and neither do we. Thus, it’s our goal to do as well as the market when it does well and better than the market when it does poorly. At first blush that may sound like a modest goal, but it’s really quite ambitious. In order to stay up with the market when it does well, a portfolio has to incorporate good measures of beta and correlation with the market. But if we’re aided by beta and correlation on the way up, shouldn’t they be expected to hurt us on the way down? If we’re consistently able to decline less when the market declines and also participate fully when the market rises, this can be attributable to only one thing: alpha, or skill. That’s an example of value-added investing, and if demonstrated over a period of decades, it has to come from investment skill. Asymmetry— better performance on the upside than on the downside relative to what your style alone would produce— should be every investor’s goal.

  10. 5 out of 5

    John

    I find Howard Marks great to read because everything he says is the correct way to go about investing, but it is not easy to follow his advice - hence why investing is such a challenging field to be successful in over many years. While at first, I found this book a bit difficult to go through as every other page is a long quote from one of his memos, after a bit, I got used to the format of the book. I also found the form, mainly 21 areas that Howard has found to be “the most important thing” at I find Howard Marks great to read because everything he says is the correct way to go about investing, but it is not easy to follow his advice - hence why investing is such a challenging field to be successful in over many years. While at first, I found this book a bit difficult to go through as every other page is a long quote from one of his memos, after a bit, I got used to the format of the book. I also found the form, mainly 21 areas that Howard has found to be “the most important thing” at some point in time, a proper flow for what he was looking to achieve. The field of investing has many different aspects that one needs to master, and Howard has done a great job bucketing all of these areas into digestible components. My favorite concepts taken away from the book are 1) second-level thinking, 2) the relationship between price and value, 3) the idea of risk to Howard, and finally, investing defensively/avoiding pitfalls. This book is a good read for an experienced investor who wishes to deepen his understanding of the investment process. Here are some of my favorite quotes and sections. 1. A very central concept to investing is thinking differently from the crowd or as Mark’s calls it “second-level thinking” - here is a quote to summarize his thoughts on that concept "For your performance to diverge from the norm, your expectations—and thus your portfolio—have to diverge from the norm, and you have to be more right than the consensus. Different and better: that’s a pretty good description of second-level thinking.” (Page 7) 2. Howard speaks at length in several chapters about value, but one of the age-old debates is how does one define value investing vs. growth investing. I thought this quote summed up the debate better than I have ever seen, "The difference between the two principal schools of investing can be boiled down to this: 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 produce substantial appreciation.” (Page 22) 3. I really enjoyed the chapters on risk and find this to be an area that is vastly under appreciated. Howard devoted three chapters on this concept and I found this quote to be the most important, "The possibility of permanent loss is the risk I worry about, Oaktree worries about and every practical investor I know worries about.” (Page 45) 4. Another quote on the concept of risk I thought was interesting this "Controlling the risk in your portfolio is a very important and worthwhile pursuit. The fruits, however, come only in the form of losses that don’t happen. Such what-if calculations are difficult in placid times.” (Page 75). In particular, the frustrating that most times you are protecting yourself from risks that NEVER happen - but when those situations finally do arise, you are exceptionally happy you have taken this into account! 5. Again, another way to think about the concept of risk and how important it is to long term investing. "The road to long-term investment success runs through risk control more than through aggressiveness. Over a full career, most investors’ results will be determined more by how many losers they have, and how bad they are, than by the greatness of their winners. Skillful risk control is the mark of the superior investor.” (Page 80) 6. The chapter on Contrarianism reminded me, in addition to second-level thinking, how important it is to be different in your thinking and your actions. Here are some good quotes relating to this area. To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit. (Page 111). If everyone likes it, it’s probably because it has been doing well. Most people seem to think outstanding performance to date presages outstanding future performance. Actually, it’s more likely that outstanding performance to date has borrowed from the future and thus presages subpar performance from here on out. (Page 116) 7. In the finding bargains chapter, one of the best quotes I’ve ever seen summing up the investment process. "The process of intelligently building a portfolio consists of buying the best investments, making room for them by selling lesser ones, and staying clear of the worst. The raw materials for the process consist of (a) a list of potential investments, (b) estimates of their intrinsic value, (c) a sense for how their prices compare with their intrinsic value, and (d) an understanding of the risks involved in each, and of the effect their inclusion would have on the portfolio being assembled.” (Page 122) 8. This is one concept that really stuck with me - investing defensively. There are many ways to make money in the market, but one avenue (advocated by Marks) is taking a defensive posture. By doing so, you have the greatest chances to stay in the game for a long period of time. "Of the two ways to perform as an investor—racking up exceptional gains and avoiding losses—I believe the latter is the more dependable. Achieving gains usually has something to do with being right about events that are on the come, whereas losses can be minimized by ascertaining that tangible value is present, the herd’s expectations are moderate and prices are low. My experience tells me the latter can be done with greater consistency.” (Page 179) 9. Finally, in the chapter on avoiding pitfalls, I found the following point an excellent reminder of the errors in investing. "Finally, it’s important to bear in mind that in addition to times when the errors are of commission (e.g., buying) and times when they are of omission (failing to buy), there are times when there’s no glaring error. When investor psychology is at equilibrium and fear and greed are balanced, asset prices are likely to be fair relative to value. In that case there may be no compelling action, and it’s important to know that, too. When there’s nothing particularly clever to do, the potential pitfall lies in insisting on being clever.” (Page 199)

  11. 4 out of 5

    Evan

    This was really a fantastic book on investing, but I don't thinking listening to it as an audiobook was the correct approach. ;) Luckily, I did listen to the book right after the finance class for my MBA program, so I understood much more of it. I think you don't need a finance background to understand his 18 "most important things," but a finance course would make it much more understandable. ;) My first takeaway is that I agree with him on his take on the Efficient Market Hypothesis - that the m This was really a fantastic book on investing, but I don't thinking listening to it as an audiobook was the correct approach. ;) Luckily, I did listen to the book right after the finance class for my MBA program, so I understood much more of it. I think you don't need a finance background to understand his 18 "most important things," but a finance course would make it much more understandable. ;) My first takeaway is that I agree with him on his take on the Efficient Market Hypothesis - that the market immediately prices in news, but the market does not always price the new information correctly, which means there is a chance for investors to outperform the market other than by chance. My second takeaway is that I should not be investing in individual stocks. He pretty much explained that for most investors they should invest passively or with active managers who know what they are doing. He doesn't say this directly, but his explanation of risk makes it pretty clear. Most investments that offer higher yields, aren't offering higher risk-adjusted yields. This means that seeking higher yield results in higher risk. Or, if an investor is buying growth, or "momentum" stocks, they are buying stocks at a higher price than the value of the stock in the hope that someone else will pay a higher price. Just like gambling! Anyway, I plan to read the book version next, but I currently left with the conclusion that I should not be buying individual stocks.

  12. 5 out of 5

    John Ross

    This is one of the best two or three books on investing I've ever read. If I was a younger person (I'm retired) just starting out (or under 50 years old), I'd read this investment advice book, and probably first. It gives an overview of how to look at investments, how to consider the market, and let's the reader know what it really takes to "beat the market." It isn't the best written book I've ever read -- it's drier than it needs to be -- but from a real professional like Mr. Marks, it is easy This is one of the best two or three books on investing I've ever read. If I was a younger person (I'm retired) just starting out (or under 50 years old), I'd read this investment advice book, and probably first. It gives an overview of how to look at investments, how to consider the market, and let's the reader know what it really takes to "beat the market." It isn't the best written book I've ever read -- it's drier than it needs to be -- but from a real professional like Mr. Marks, it is easy to overlook that and focus on the content. Indirectly, he explains why most investors and investment advisors don't consistently beat the market, and thus the reason Warren Buffett stands almost alone as a successful investor. [The second book I'd read if I was interested in investing would be "A Random Walk Down Wall Street" by Burton Malkiel. For most people these two books would be all that would be needed!] Overall, a very worthwhile book on investing.

  13. 4 out of 5

    Steve

    A disappointing read given Howard Marks' reputation and thoughtful investing style.  The book is a clumsy cut-and-paste job performed on the Oaktree shareholder letters (freely available on their website).  After a promising first few chapters, the book fails to launch into any real meat.  Clearly we need to use "second level thinking" to take into account the expectations of the rest of the market - but how does one put that into practice?  Some nitty-gritty real world advice would not have gon A disappointing read given Howard Marks' reputation and thoughtful investing style.  The book is a clumsy cut-and-paste job performed on the Oaktree shareholder letters (freely available on their website).  After a promising first few chapters, the book fails to launch into any real meat.  Clearly we need to use "second level thinking" to take into account the expectations of the rest of the market - but how does one put that into practice?  Some nitty-gritty real world advice would not have gone amiss. If you're looking for some investing wisdom from a successful practitioner read the Intelligent Investor by Ben Graham or Contrarian Investment Strategies by David Dremen.  Both will provide a lot more value for your time and money (something you'll clearly appreciate as an investor!)

  14. 4 out of 5

    Janet

    First - I'm proud of me for finishing this book. It was a little more technical than I'd expected. I had to take notes to help me think through the details Howard Marks included. Did I benefit from the read? Yes. I found it repetitive, though. It is evident the author had difficulty working the categories for the papers he included here. But, repetition also provides permanence so it probably added to my personal benefit. First - I'm proud of me for finishing this book. It was a little more technical than I'd expected. I had to take notes to help me think through the details Howard Marks included. Did I benefit from the read? Yes. I found it repetitive, though. It is evident the author had difficulty working the categories for the papers he included here. But, repetition also provides permanence so it probably added to my personal benefit.

  15. 4 out of 5

    Joseph

    This book is a very good read especially when you have some practical experience investing. It describes time tested concepts that we can adopt to become successful investors. Price and valuation is something that has been deeply hammered into me from this book although it takes a lot of courage to buy low when sentiment is bad.

  16. 5 out of 5

    Douglas O'laughlin

    An amazing book that really helped define me as an investor. Beyond prolific.

  17. 5 out of 5

    Patrick Voigt

    Must read for beginning investors (really ALL investors) who wish to have long-term success investing.

  18. 4 out of 5

    Brian Ooi

    A lucid argument for value investing, and a reminder to always ask where your views are different from the market.

  19. 4 out of 5

    Robert Martin

    So full of investment wisdom – I wish I had read this book in March. While I sold most of my portfolio in February, missing the majority of the drop, I'll be the first to admit that I was slow on the rebound. The Most Important Thing is a short read and is split into 20 chapters, each detailing a different lesson. Marks manages to share his considerable wisdom with humility and without platitude. The only possible criticism is that there is a huge amount of focus on the 2004-2009 time period, bu So full of investment wisdom – I wish I had read this book in March. While I sold most of my portfolio in February, missing the majority of the drop, I'll be the first to admit that I was slow on the rebound. The Most Important Thing is a short read and is split into 20 chapters, each detailing a different lesson. Marks manages to share his considerable wisdom with humility and without platitude. The only possible criticism is that there is a huge amount of focus on the 2004-2009 time period, but these are precisely the parts that I wish I had read sooner. One of the biggest takeaways is the importance of "second-level thinking". The first level is often trivially easy (i.e coronavirus is bad for the markets) and consequently does not offer sustainable opportunity unless you are good at market timing and very quick to react (very few people are – myself included). You need to think of second-order effects, have a keen sense of value relative to price, and know where you are in the cycle. The Most Important Thing is not a practical guide to investment, but it is a wonderful book on how to think about markets. "You must do things not just because they’re the opposite of what the crowd is doing, but because you know why the crowd is wrong." "Experience is what you got when you didn’t get what you wanted." "An accurate opinion on valuation, loosely held, will be of limited help. An incorrect opinion on valuation, strongly held, is far worse."

  20. 5 out of 5

    Justas Šaltinis

    "There are old investors, and there are bold investors, but there are no old bold investors." "Every once in a while, someone makes a risky bet on an improbable or uncertain outcomes and ends up looking like a genius." "We never know where we're going, we ought to know where we are. We can infer where markets stand in their cycle from behavior of those around us." "The seven scariest words in the world for the thoughtful investor - too much money chasing too few deals - providing an unusually apt d "There are old investors, and there are bold investors, but there are no old bold investors." "Every once in a while, someone makes a risky bet on an improbable or uncertain outcomes and ends up looking like a genius." "We never know where we're going, we ought to know where we are. We can infer where markets stand in their cycle from behavior of those around us." "The seven scariest words in the world for the thoughtful investor - too much money chasing too few deals - providing an unusually apt description of market conditions." "Large amounts of money are not made by buying what everybody likes. They are made by buying what everybody underestimates" "Prices are too high” is far from synonymous with "the next move will be downward." Things can be overpriced and stay that way for a long time . . . or become far more so."

  21. 4 out of 5

    Daniel Wei-hsuan

    I'd never thought of reading an investment book would feel like reading a philosophy book. It is really more of an art than science. Howard Marks engages in all topics regarding investing such as the concept of risk, the psychology of fear, the invariability of cycles, and how everything eventually comes down to value. You will find ambiguities in these concepts, the more you read the more blurry the concepts become, and it is when you can start seeing concepts as higher-level abstract then you s I'd never thought of reading an investment book would feel like reading a philosophy book. It is really more of an art than science. Howard Marks engages in all topics regarding investing such as the concept of risk, the psychology of fear, the invariability of cycles, and how everything eventually comes down to value. You will find ambiguities in these concepts, the more you read the more blurry the concepts become, and it is when you can start seeing concepts as higher-level abstract then you start defining them at the appropriate low-level context in your own battlefields.

  22. 5 out of 5

    Kyle Bale

    When times are good, it’s easy to crown financial winners and think of their formulas as impeccable. Marks often quotes Nassim Nicholas Taleb’s “The Black Swan” and “Fooled By Randomness” when speaking to the idea that heroes are often made when it is not merit but often luck that make them so. In the world of investing, we are always seeking alpha, or some semblance of “investor skill” or insight to be gleaned in order to “beat the market.” In this book Marks admits that this skill does exist, When times are good, it’s easy to crown financial winners and think of their formulas as impeccable. Marks often quotes Nassim Nicholas Taleb’s “The Black Swan” and “Fooled By Randomness” when speaking to the idea that heroes are often made when it is not merit but often luck that make them so. In the world of investing, we are always seeking alpha, or some semblance of “investor skill” or insight to be gleaned in order to “beat the market.” In this book Marks admits that this skill does exist, it just takes a great understanding of what is truly important when investing in securities to find. Though I am less interested in stocks than I am other investment vehicles as of late, I will always know it as my first foray into the world of investing. Books like “The Most Important Thing” that spell out the fundamentals of value and/or growth investing are hugely helpful when building one’s foundational understanding. Supplemented with a history of memos he sent out to his staff over the years, Marks structures each chapter around a single principle of value investing that makes one successful in the long-term. The idea I found most interesting is the concept of having better returns when times are bad and lower returns when times are good. If an individual is truly seeking a higher risk-adjusted return, this seems the only possible way. Returns are highest when there is mass hysteria in the market and there is more demand for places to put capital than there is investments that need capital. While a more defensive strategy than offensive, the benefits of such an approach are readily apparent. Hearing this message now especially was helpful as it is fairly clear we are in another inflated market not just in the stock world. As I look for properties to live in and rent out, I am amazed at the prices people are willing to pay for houses that only generate a meager amount of monthly income. I keep thinking to myself, “how does this make sense?” The quick answer is that it doesn’t, and that we are due for a correction any day now. The dangerous part of that thinking is that you can’t predict when the market will turn, and anyone who thinks they can is playing a game of luck, not a game of information. A leading indicator is only that, and is not the true cause of a given event until viewed in hindsight. If there were a singular index or metric that indicated the housing collapse in 2008, we would be applying that formula right now and would need only a clock until those same stars aligned to know when next it will happen. Because there is no such metric or combination of events to spur an economic downturn, we are stuck in a guessing game. To combat this uncertainty, Marks argues that the thoughtful investor should employ the Warren Buffet strategy and stick to what is known when times are in a frenzy. Sure, you might want to bash your head against the wall when your moronic neighbor makes 50% returns on the latest tech IPO, but by sticking to your principles during the good times, you will ensure strong returns when it inevitably flops. Definitely good food for thought as we continue into this seemingly never-ending bull market in both stocks and housing.

  23. 5 out of 5

    Karl Wackerberg

    A must read for anyone interested in investing. Might be a bit repetitive, although, it might be needed to get the message across. A key message in the book is that of avoiding risk through buying at intrinsic value.

  24. 5 out of 5

    Tadas Talaikis

    Advice although pretty basic and introductory, but good, despite problems, like for example, you dont experience averages (e.g., of probabilities or success rates) and you usually don't know where it is that "extreme". It may be (and usually it is) just local extreme. And lots of other things, we can only be certain of only one thing - there is no certainty, especially when it is created by trillions dollars of debt. For long term traders/ investors, as it has almost nothing about alpha. I can't Advice although pretty basic and introductory, but good, despite problems, like for example, you dont experience averages (e.g., of probabilities or success rates) and you usually don't know where it is that "extreme". It may be (and usually it is) just local extreme. And lots of other things, we can only be certain of only one thing - there is no certainty, especially when it is created by trillions dollars of debt. For long term traders/ investors, as it has almost nothing about alpha. I can't imagine how "big money" advice can be useful for playground of retailers where system and time works against you. So, it should be renamed to the "Uncommon Sense for the Idiots who run pension funds". Of course, in that case, market is very limited for such a book (not enough buyers). And on next "so', the better book would be Trading and Exchanges: Market Microstructure for Practitioners, it has lots of basic, but very practical information, unlike broad self-help type of advice.

  25. 5 out of 5

    Harshdeep

    I have read all of the memos from Howard Marks, so most of the concepts (and book) was just like re-reading gist of those memos. There are few learnings which is covered in more details in book which are scattered in several memos so in that regards book was worth to read. Book is good read, if you are looking for re-read of memos, and good for them too who do not want to go through all 30 years worth memos and want to have a crash course.

  26. 4 out of 5

    Dmitry

    This is an outstanding book that is critical to understanding investment markets and risk. However, my personal preference is actually for the author's (Howard Marks') "Memos from the Chairman". In the memos Mr. Marks has greater freedom to drill down into certain topics and apply them to the current events. The memos can be viewed here: http://www.oaktreecapital.com/memo.aspx. This is an outstanding book that is critical to understanding investment markets and risk. However, my personal preference is actually for the author's (Howard Marks') "Memos from the Chairman". In the memos Mr. Marks has greater freedom to drill down into certain topics and apply them to the current events. The memos can be viewed here: http://www.oaktreecapital.com/memo.aspx.

  27. 5 out of 5

    Panz

    This deserves to be read again and again and again, for both investors and non investors. It contains the wisdom of someone who has been in the game from the very start, and took the momentous effort to crystallize these nuggets of gold for future investors.

  28. 4 out of 5

    Sudhir Bharadhwaj

    Superb book ! Read it to understand the relationship between Risk and Return. Loved all the "Most Important Thing"s . In particular notice the time stamp of few memos and how timely were they in imparting much needed wisdoms to the investors. Superb book ! Read it to understand the relationship between Risk and Return. Loved all the "Most Important Thing"s . In particular notice the time stamp of few memos and how timely were they in imparting much needed wisdoms to the investors.

  29. 5 out of 5

    Iqbal Yusuf

    A good book on investing. Howard Marks stresses on the importance for the investors to be aware of risk, than thinking of getting gains in the stock market. If you want to read his book, go for this book & then go for Mastering the Market Cycle. A must read for investors.

  30. 4 out of 5

    Andrei Savu

    If you read only one book about investing then go for this one. It covers a lot of ground.

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