Inefficiency is a necessary condition for superior investing. Attempting to outperform in a perfectly efficient market is like flipping a fair coin: the best you can hope for is fifty-fifty. For investors to get an edge, there have to be inefficiencies in the underlying process - imperfections, mispricings-to take advantage of.

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The Most Important Thing

The Most Important Thing

by Howard Marks

The random walk hypothesis says a stock's price movements are of absolutely no help in predicting future movements. In other words, it's a random process, like tossing a coin. The hypothesis says, the fact that a stock's price has risen for the last ten days tells you nothing about what it will do tomorrow.

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An excellent investor may be one who - rather than reporting higher returns than others - achieves the same return but does so with less risk or even achieves a slightly lower return with far less risk.

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  1. There is nothing wrong with trying to make money . Indeed, the desire for gain is one of the most important elements in the workings of the market and the overall economy. The danger comes when it moves on furher to greed.
  2. People who don't care about money generally don't go into investing.

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