Money and Finance
Author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor
People who might be perfectly happy with their lot in isolation become miserable when they see others do better. In the world of investing, most people find it terribly hard to sit by and watch while others make more money than they do.
Howard Marks: Emotion and ego: A lot of the drive in investing is competitive. High returns can be unsatisfying if others do better, while low returns are often enough if others do worse. The tendency to compare results is one of the most invidious. The emphasis on relative returns over absolute returns shows how psychology can distort the process.
I know of a nonprofit institution whose endowment earned 16 percent a year from June 1994 to June 1999, but since its peers averaged 23 percent, the people involved with the endowment were dejected.
Seth Klarman: Even the best investors judge themselves on the basis of return. It would be hard to evaluate yourself on risk, since risk cannot be measured. Apparently, the risk-averse managers of this endowment were disappointed with their relative returns even though their risk-adjusted performance was likely excellent, as borne out by their performance over the following three years. This highlights just how hard it is to maintain conviction over the long run when short-term performance is considered poor.
Without growth stocks, technology stocks, buyouts and venture capital, the endowment was entirely out of step for half a decade. But then the tech stocks collapsed, and from June 2000 to June 2003 the institution earned 3 percent a year while most endowments suffered losses. The stakeholders were thrilled.
There's something wrong with this picture. How can people be unhappy making 16 percent a year and happy making 3 percent? The answer lies in the tendency to compare ourselves to others and the deleterious impact this can have on what should be a constructive, analytical process.
Joel Greenblatt: This is incredibly important. Most institutional and individual investors benchmark their returns, and therefore most end up chasing the crowd: accent on the wrong sylLABle.
Excerpted from, The Most Important Thing Illuminated by Howard Marks. Copyright (c) 2012 Howard Marks. Used by arrangement with Columbia University Press.
Author Bio
Howard Marks, author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor, is chairman and cofounder of Oaktree Capital Management, a Los Angeles-based investment firm with $80 billion under management. He holds a Bachelor's Degree in finance from the Wharton School and an MBA in accounting and marketing from the University of Chicago. He is the author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor, published by Columbia Business School Publishing.
- Howard Marks On Bloomberg
Link to video: Howard Marks on Risk Assessment, Market Strategy Sept. 5 (Bloomberg) -- Howard Marks, chairman of Oaktree Capital Group LLC, talks about assessing market risk, volatility and sentiment. Marks speaks with Stephanie Ruhle and Erik Schatzker...
- Howard Marks' Crystal Ball Proved Accurate
Link to article: Howard Marks' Crystal Ball Proved Accurate Ten years ago, veteran investor and writer Howard Marks sent a contrarian -- and prescient -- memo to clients of his firm, Oaktree Capital Management, assessing the state of the hedge...
- Howard Marks Quote (risk)
“Great investing requires both generating returns and controlling risk. And recognizing risk is an absolute prerequisite for controlling it. Hopefully I’ve made clear what I think risk is (and isn’t). Risk means uncertainty about which outcome...
- Speech Notes: Howard Marks At Nyssa
Via Distressed Debt Investing: On April 5, Howard Marks, legendary investor and Chairman of Oaktree Capital Management, spoke at New York Society of Securities Analysts. He is also the author of the book, “The Most Important Thing: Uncommon Sense for...
- The Most Important Thing Illuminated
This looks pretty interesting:Forthcoming! The Most Important Thing Illuminated (digital edition) will be available at Amazon, iTunes, and wherever e-books are sold! ...Now, Columbia Business School Publishing is proud to announce an innovative digital...
Money and Finance
Excerpt from The Most Important Thing Illuminated - by Howard Marks
Combating Negative Influences
By Howard Marks,
By Howard Marks,
Author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor
People who might be perfectly happy with their lot in isolation become miserable when they see others do better. In the world of investing, most people find it terribly hard to sit by and watch while others make more money than they do.
Howard Marks: Emotion and ego: A lot of the drive in investing is competitive. High returns can be unsatisfying if others do better, while low returns are often enough if others do worse. The tendency to compare results is one of the most invidious. The emphasis on relative returns over absolute returns shows how psychology can distort the process.
I know of a nonprofit institution whose endowment earned 16 percent a year from June 1994 to June 1999, but since its peers averaged 23 percent, the people involved with the endowment were dejected.
Seth Klarman: Even the best investors judge themselves on the basis of return. It would be hard to evaluate yourself on risk, since risk cannot be measured. Apparently, the risk-averse managers of this endowment were disappointed with their relative returns even though their risk-adjusted performance was likely excellent, as borne out by their performance over the following three years. This highlights just how hard it is to maintain conviction over the long run when short-term performance is considered poor.
Without growth stocks, technology stocks, buyouts and venture capital, the endowment was entirely out of step for half a decade. But then the tech stocks collapsed, and from June 2000 to June 2003 the institution earned 3 percent a year while most endowments suffered losses. The stakeholders were thrilled.
There's something wrong with this picture. How can people be unhappy making 16 percent a year and happy making 3 percent? The answer lies in the tendency to compare ourselves to others and the deleterious impact this can have on what should be a constructive, analytical process.
Joel Greenblatt: This is incredibly important. Most institutional and individual investors benchmark their returns, and therefore most end up chasing the crowd: accent on the wrong sylLABle.
Excerpted from, The Most Important Thing Illuminated by Howard Marks. Copyright (c) 2012 Howard Marks. Used by arrangement with Columbia University Press.
Author Bio
Howard Marks, author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor, is chairman and cofounder of Oaktree Capital Management, a Los Angeles-based investment firm with $80 billion under management. He holds a Bachelor's Degree in finance from the Wharton School and an MBA in accounting and marketing from the University of Chicago. He is the author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor, published by Columbia Business School Publishing.
For more information, please visit Amazon
- Howard Marks On Bloomberg
Link to video: Howard Marks on Risk Assessment, Market Strategy Sept. 5 (Bloomberg) -- Howard Marks, chairman of Oaktree Capital Group LLC, talks about assessing market risk, volatility and sentiment. Marks speaks with Stephanie Ruhle and Erik Schatzker...
- Howard Marks' Crystal Ball Proved Accurate
Link to article: Howard Marks' Crystal Ball Proved Accurate Ten years ago, veteran investor and writer Howard Marks sent a contrarian -- and prescient -- memo to clients of his firm, Oaktree Capital Management, assessing the state of the hedge...
- Howard Marks Quote (risk)
“Great investing requires both generating returns and controlling risk. And recognizing risk is an absolute prerequisite for controlling it. Hopefully I’ve made clear what I think risk is (and isn’t). Risk means uncertainty about which outcome...
- Speech Notes: Howard Marks At Nyssa
Via Distressed Debt Investing: On April 5, Howard Marks, legendary investor and Chairman of Oaktree Capital Management, spoke at New York Society of Securities Analysts. He is also the author of the book, “The Most Important Thing: Uncommon Sense for...
- The Most Important Thing Illuminated
This looks pretty interesting:Forthcoming! The Most Important Thing Illuminated (digital edition) will be available at Amazon, iTunes, and wherever e-books are sold! ...Now, Columbia Business School Publishing is proud to announce an innovative digital...