Transcript of "Howard marks what makes an investor smart"
Howard Marks: What makes an investor smartThis hard-core value hunter shares his insights on what makes him a good investorAuthor : iFast Content TeamThe 10th Value Investor Conference held in Omaha, USA, this month, featured some of the bestminds in investing today. One of them was Howard Marks, money manager and chairman,Oaktree Capital Management.Marks is a hard-core value hunter. His book The Most Important Thing: Uncommon Sense for theThoughtful Investor received high praise with book jacket promos from the likes of WarrenBuffett.Here are some excerpts from Guru Focus on what this contrarian investor had to say.On buying when everyone is down and selling when up…There is no correct rule. There cannot be a rule that always works. It is true that if I say buywhen people are selling, there will be times that cause you to lose money. Nothing reliable is tobe said about making money, because if there were, study would be intense and everybody witha positive IQ would be rich.This point was also touched in Marks’ latest memo to investors where he stated that there islittle he hates more than investment generalizations. He states: I like the way Mark Twainsummed up on the subject more than 100 years ago: All generalizations are false, including thisone. I consider most investment generalizations as useless as that great oxymoron: "commonsense".On market timing …It is difficult to get the timing right. “Should” isn’t the same as “will.” It is hard to do the rightthing in the investing world and impossible to do the right thing at the right time. No one shouldwork under the assumption that they are going to get the time right. If you have bet too much onwhat should happen, happening right away, you could be in big trouble.There are three stages of a bull market:1. People believe things will get better2. Most believe it has gotten better3. Everyone thinks things will stay good foreverBuy at the first and sell at the third.There aren’t any safe or risky things to buy and there aren’t any safe or risky investmentstrategies. They are safe in Phase I and risky in Phase III. What the wise man does in thebeginning the fool does in the end. Every trend eventually becomes overdone. Why? Inbeginning only wise men find it, and it works. Until the last stage when the fool buys it at a highprice and loses a lot of money. You have to be conscious of where we are in the cycle.Other than buying securities one at a time, the most important question is whether to be onoffense or defense, or how much of each. That decision should be informed based on where weon the stages of the bull market.
On smart investing….Smart investing does not consist of buying good things, but rather of buying things well. Price iswhat matters most for investment success.He had addressed this issue earlier in one of his memos. You can invest in the best of companiesand have a bad experience, or you can invest in the worst and have a good experience. Becauseit is not asset quality that determines investment risk. A too-high price can make somethingrisky. A too-low price can make it safe.It is naive to assume that price is the only factor at play. Deterioration of an asset can cause aloss, as can its failure to produce expected profits. But, all other things being equal, the price ofan asset is the principal determinant of its riskiness.No asset is so good that it can’t be bid up to the point where it’s overpriced and dangerous. Fewassets are so bad that they can’t become underpriced and thus safe (not to mention potentiallylucrative).People tend to warm to investments as they rise and shun them when they fall. This is one of thebiggest mistakes people make. We can take advantage of it.On what he has learnt through time……The best way to understand is by thinking of the pendulum. The pendulum always swingsbetween optimism and pessimism. Risk aversion and tolerance. Buying too much and selling toomuch. And it will never stop as long as people are involved in the markets.I observe what is going on around me in terms of investor behavior and the market and actaccordingly. To see the upward swing of the pendulum (which carries so much enthusiasm) asworrisome and the downward swing as encouraging.Buffett’s favourite quote is the less prudence with which people conduct their affairs, thegreater prudence with which we should conduct ours. I have learned to do that.Howard Marks: Advice to ContrariansJim Rogers: Think UnconventionallySam Zell: The Grave DancerWarren Buffet: Profit from PanicContrarian investors: Worlds most famous contrarian investorsBy investing via Fundsupermart, you have access to 41 AMCs in India. Heres why youshould invest via Fundsupermart.com.At no cost to you, the Fundsupermart Mobile Application helps you take charge of yourportfolio with up-to-date information at your fingertipsTo buy and sell mutual funds online, click here.
Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual fundsof any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or bematerially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or saleof any mutual fund. No investment decision should be taken without first viewing a mutual funds scheme information documentincluding statement of additional information. Any advice herein is made on a general basis and does not take into account thespecific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, andlegal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative ofthe future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise.Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website. Please read ourdisclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is noguarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAVof the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Pastperformance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of theScheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement ofAdditional Information and Scheme Information Document carefully before investing.