Howard Marks is worth $2.2 billion.
His secret to investing?
These 7 principles:
His secret to investing?
These 7 principles:
1. Second-Level Thinking
First-level thinking:
• Everyone can do it
• Simplistic and superficial
Second level-thinking:
• Thinks in probabilities
• Not influenced by FOMO
• Builds on the general consensus
To achieve superior results, you have to hold contrarian views.
First-level thinking:
• Everyone can do it
• Simplistic and superficial
Second level-thinking:
• Thinks in probabilities
• Not influenced by FOMO
• Builds on the general consensus
To achieve superior results, you have to hold contrarian views.
2. The Efficient Market Hypothesis
This hypothesis states:
• Participants in a market have equal access to information
• Participants are educated and hard-working
• Thus, assets are priced fairly
When you have a new investment idea, ask:
“And who doesn’t know that?”
This hypothesis states:
• Participants in a market have equal access to information
• Participants are educated and hard-working
• Thus, assets are priced fairly
When you have a new investment idea, ask:
“And who doesn’t know that?”
3. Relationship Between Price and Value
Investment success doesn’t come from “buying good things.”
It comes from “buying good things well.”
The best investments are those where you buy at a price below value.
This is the most dependable way to make money in the long run.
Investment success doesn’t come from “buying good things.”
It comes from “buying good things well.”
The best investments are those where you buy at a price below value.
This is the most dependable way to make money in the long run.
4. Understanding Risk
Investing consists one of one main principle: Predicting the future.
But no one can be 100% certain of the future, so risk is inescapable.
Understanding this allows for more rational decision-making.
And for expectations to be kept in check.
Investing consists one of one main principle: Predicting the future.
But no one can be 100% certain of the future, so risk is inescapable.
Understanding this allows for more rational decision-making.
And for expectations to be kept in check.
5. Being Attentive to Cycles
Rule No.1:
Most things will prove to be cyclical.
Rule No.2:
Greatest opportunities for gain (and loss) come when people forgot number one.
Nothing goes in 1 direction forever, either direction.
Be conscious of the cyclical nature of investing.
Rule No.1:
Most things will prove to be cyclical.
Rule No.2:
Greatest opportunities for gain (and loss) come when people forgot number one.
Nothing goes in 1 direction forever, either direction.
Be conscious of the cyclical nature of investing.
6. Awareness of the Pendulum
Investment markets follow a pendulum-like swing between:
• Euphoria and depression
• Excitement and boredom
• Overpriced and underpriced
Be careful of getting too high or low.
Be stoic, remove your emotions, and make rational decisions.
Investment markets follow a pendulum-like swing between:
• Euphoria and depression
• Excitement and boredom
• Overpriced and underpriced
Be careful of getting too high or low.
Be stoic, remove your emotions, and make rational decisions.
7. Contrarianism
You don’t make loads of money buying what everybody likes.
Real fortunes are made by buying what everyone underestimates.
If everyone collectively is pumping a stock, be wary.
And if everyone’s collectively dumping, be ready to strike.
You don’t make loads of money buying what everybody likes.
Real fortunes are made by buying what everyone underestimates.
If everyone collectively is pumping a stock, be wary.
And if everyone’s collectively dumping, be ready to strike.
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