“If you were to read just five books in your life to become a sensible investor,” I often suggest people seeking my view, “…they have to be Warren Buffett’s letters, Poor Charlie’s Almanack, Peter Lynch’s One Up on Wall Street, Ben Graham’s Intelligent Investor, and Howard Marks’s memos.”
Well, if you don’t know who Howard Marks is, let me tell you he is the CEO of Oaktree Capital and is one of the most famous investors who manages to keep a low profile, despite managing almost US$ 90 billion.
Marks is also the author of an amazing book – The Most Important Thing: Uncommon Sense for the Thoughtful Investor. In its ultimate praise, Warren Buffett writes, “This is that rarity, a useful book”.
Apart from the investing gems he has shared through this book, Marks also writes regular memos for investors where he outlines his investment philosophy, in line with what Buffett does via his annual letters to shareholders.
Here is what Buffett has to say about Marks’s memos – “When I see memos from Howard Marks in my mail, they’re the first thing I open and read. I always learn something…”
From whatever I have read in his memos, Marks focuses a lot on risk control and seeks to exploit market cycles. He prefers judgment to mechanical quantification, and believes in the power of checklists.
Marks’s latest memo is a masterpiece in itself. One particular reason it touches a chord with me is because it talks about a pain-point – the concept of ‘risk’ – that I feel as an investor each day, and maybe you do too.
Here are 5 big ideas I have pulled out from the memo. If you wish to learn anything and everything about investment risk, this one memo will help you do that.
In fact, reading this memo would provide you with all the big lessons that even a one-year MBA in Investment Risk won’t provide.
So, let’s get going with 5 big lessons from Howard Marks’s latest memo (the emphasis is mine).