Though not as famous as Warren Buffett, there is a major similarity between the Oracle of Omaha and famed investor Howard Marks.
Both are known for their letters to investors, which lay out their strategy, rationale and economic worldview. The most recent of Howard Marks’ letters doesn’t disappoint.
The letter explains how legendary investor Howard Marks views successful investing and there is a lot that the average investor should take away from his perspective.
Howard Marks got his start as an equity research analyst at Citicorp (NYSE: C). During the final seven years of his 16-year tenure with Citi he oversaw the division managing convertible and high-yield securities.
After leaving Citi he joined the private money management firm TCW Group where he ran the firm’s investments in high-yield bonds and convertible securities. While there, he helped start one of the first distressed debt investment funds from a mainstream institution.
He and five other partners left TCW in 1995 to start Oaktree Capital Management (NYSE: OAK), a now-public money management firm focusing on the strategies Marks had mastered in his previous jobs – high-yield bonds, distressed debt and private equity.
Howard Marks remains chairman of Oaktree and has gained a significant following as a result of the “memos to Oaktree clients.”
His most recent memo, Dare to Be Great II, was published earlier this month. In it, Marks offers nuggets of insight that should be useful to any investor, be they an individual or an institutional money manager.
You can read the letter in its entirety here – and I highly suggest you do – but I’ve pulled out a few highlights below:
“Who wouldn’t dare to be great? No one…The real question is whether you dare to do the things that are necessary in order to be great. Are you willing to be different, and are you willing to be wrong?”
“Only if your behavior is unconventional is your performance likely to be unconventional.”
“To succeed in any activity involving the pursuit of gain, we have to be able to withstand the possibility of loss.”
“Being too far ahead of your time is indistinguishable from being wrong.
“Unconventional behavior is the only road to superior investment results, but it isn’t for everyone. In addition to superior skill, successful investing requires the ability to look wrong for a while and survive some mistakes.”
The Bottom Line for Successful Investing
The investment advice offered by Howard Marks isn’t a list of stocks or assets to go out and buy. Rather, it’s a recipe for a certain way of thinking.
The title of his memo, Dare to Be Great could have been written Dare to Be Different because, as he suggests, until an investor is willing to be different from the crowd, his or her results can never be that different from those in the crowd.
It’s true. If you put all of your money in an index fund then your investments will never perform worse than that index. But your gains will also never exceed the growth of that index.
To achieve tremendous investment results Marks emphasizes that an investor must be willing to be wrong and, perhaps more importantly, to look wrong in the eyes of his or her peers.
Legendary investor Howard Marks views successful investing strategies as involving more than just being right but also a willingness to be wrong. A successful strategy requires tremendous timing or a structure that allows the investor to survive being wrong long enough for his or her investment thesis to prove right.
How does this line up with how you think about successful investing?
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