The Most Important Thing — Uncommon Sense for the Thoughtful Investor

One sentence comment:
In order to truly appreciate the wisdom in this book, you need to revisit it several times at different stage of your life .

My Key Takeaways:
1. Superior insight into value is the key to superior investment results. The author calls it “the second-level thinking”, but what he really means is that a good investor has to be superior than the crowd, which has two ramifications. First, investing is by definition competitive. Better results defines better investor and demands better insights from them. Second, investing is also the loser’s game. Unlike in professional tennis games, in amateurs’ tennis games, points are scored when the loser makes mistakes. Similarly, the superior investor beats the market when they can profit from the average investors’ mistakes.

2. The superior investor never forgets the goal is to find best buys, not best assets.

3. Reason must overcome emotion.

4. The market moves like a pendulum. The superior investor always moves a step ahead the average. To the average, the superior investors might behave in a contrarian way.

5. Being to far ahead of your time is indistinguishable from being wrong. It can require patience and fortitude to hold positions long enough to be proved right.

6. Risk control and margin for errors must be present in your portfolio at all times. Because in the long run, you will run into pitfalls and defensive investing can save you from be killed.

7. No one really knows lies ahead in terms of the macro future. Rather than pretending to know the future, the successful investors acknowledge the randomness of things and the probability distribution that underlies future developments.

8. Y= alpha + beta * r
Can the aggressive investor keep from giving back gains when the market turns down? Will the defensive investor participate substantially when the market rises? This kind of asymmetry is the expression of real skills.

The Most Important Thing — Uncommon Sense for the Thoughtful Investor
Howard Marks


1. Second-level thinking
2. Understanding Market Efficiency (and Its Limitations)
3. Value
4. The Relationship Between Price and Value
5. Understanding Risk
6. Recognizing Risk
7. Controlling Risk
8. Being Attentive to Cycles
9. Awareness of the Pendulum
10. Combating Negative Influences
11. Contrarianism
12. Finding Bargains
13. Patient Opportunism
14. Knowing What You Don’t Know
15. Having a Sense for Where We Stand
16. Appreciating the Role of Luck
17. Investing Defensively
18. Avoiding Pitfalls
19. Adding Value
20. Putting It All Together


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