I just finished reading The Most Important Thing (Howard Marks, 180 pages, 2018). This was a gift from a investor friend, and I’m happy she gave it to me! Otherwise, I would probably not have read this book, at least not at this moment, and I would simply miss out on a great title.
I love the fact that the author, being quite seasoned as he is, kept answering many times, along the years, on what “the most important” thing about investment is. And it turns out that there are many “most important things”, and they are all outlined in the different chapters of the book.
Investing is about value, risk, economical cycles, as much as it is all about second-level thinking, psychology, and knowledge. The fact that many things are important just makes the work of an investor more interesting and challenging.
That’s why the reflections of the author are so useful. This book contains years of distilled wisdom that are passed away in an accessible format. I like specially the author’s deep sense of respect for different economical cycles, and the description of how different investing styles (defensive vs. aggressive) goes about in actions during bullish and bearish market times.
Although Howard Marks is clearly a defensive investor, he is very clear about the fact that any style could do, as long as the investor acts to compensate the weakness of his approach. A defensive investor is happy with average gains when market is up, being sure that he is more rusted to avoid losses when things turn down. While an aggressive investor will try to beat the market in bullish times, and hopefully avoid big losses on bearish ones.
What is clear, however, is that any measurements of performance cannot be done in a year or two. A skilled investor, if he or she exists, can only be judged over the span of multiple years.
And that’s what is the strong point on the author’s approach. Since nobody can predict the future, the only way to assess different strategies is by looking over results produced over many years. Or decades.