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The Most Important Thing Summary
About The Most Important Thing Book
"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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Successful investing requires thoughtful attention to many separate aspects, all at the same time. The Most Important Thing by Howard Marks covers these key aspects in layman language and without a lot of finance jargon though it covers the concepts of investment theory.
Everything should be made as simple as possible, but not simpler.
ALBERT EINSTEIN
487
Market Investing Basics
- Even the best investors don’t get it right every time. The reasons are simple. No rule always works.
- Psychology plays a major role in markets, and because it’s highly variable, cause-and-effect relationships aren’t reliable.
- Because investing is at least as much art as it is science, it’s never my goal – in this book or elsewhere – to suggest it can be routinized.
- One’s investment approach be intuitive and adaptive rather than be fixed and mechanistic.
- Just invest in an index fund that buys a little of everything. That will give you what is known as ‘market returns’.
449
Second Level Thinking
Only a few of them will achieve the superior insight, intuition, sense of value and awareness of psychology that are required for consistently above-average results. Doing so requires second-level thinking.
Your thinking has to be better than that of others – both more powerful and at a higher level.
What is second-level thinking?
First-level thinking says, ‘It’s a good company; let’s buy the stock.’ Second-level thinking says, ‘It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.’
459
The art of investment has one characteristic that is not generally appreciated. A creditable, if unspectacular, result can be achieved by the lay investor with a minimum of effort and capability; but to imrove this easily attainable standard requires much application and more than a trace of wisdom
BEN GRAHAM, THE INTELLIGENT INVESTOR
61
Everything should be made simple as possible, but not simpler
ALBERT EINSTEIN
63
It's not supposed to be easy, anyone who finds it easy is stupid.
CHARLIE MUNGER
64
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.
BOTTOM LINE
22
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.
EUGENE FAMA
16
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.
UNKNOWN
17
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