The Most Important Thing by Howard Marks has changed my perception of risk and made me question my investing style. In it, he espouses second-level thinking and prefers defensive investing to offensive investing. He elaborates on the need to be aware and attentive of cycles and the oscillating pendulum between euphoria and extreme pessimism. He also believes in the appreciating the role of luck in our investments and the importance of knowing what we do not know, and as such avoiding pitfalls. To him, lower returns taken with much less risks is always preferred to higher returns achieved by taking on larger risks. He deems it a success if Oaktree (his fund) keeps up with the market during bull years, but outperforms during the bear years. Oaktree Capital Management specializes in off-the-beaten-path and contrarian investments, and favors companies with tangible assets. The firm’s motto is “if we avoid the losers, the winners will take care of themselves.”
This is a very enlightening book, especially for young investors like myself, who lack the experience in the market. It gives one a new perspective on risk and returns, and I would highly encourage any investor looking to refine their thought process to read it. As a person whom Warren Buffet once said, “When I see memos from Howard Marks in my mail, they’re the first thing I open and read. I always learn something, and that goes double for his book”, I am confident the reader of The Most Important Thing would similarly take back nuggets of wisdom from it.