In his recent interview on the Invest Like The Best Podcast, Howard Marks discussed why investors need to take uncomfortable, idiosyncratic positions to achieve superior returns. Here’s an excerpt from the interview:
Marks: Dave Swensen, who passed away recently, who ran the endowment at Yale with great effect for maybe 35 years, said in his book, Pioneering Portfolio Management, that investment management requires the adoption of uncomfortably idiosyncratic positions. You can’t have a highly superior outcome from others if you don’t do things that are different from others.
By definition, if you make the same investments as everybody else, you’ll have the same performance. That’s not a way to distinguish yourself. If you want to have great, outstanding great performance, you have to do something different, idiosyncratic.
By definition, it’s going to be uncomfortable because everybody else thinks that X is a buy; you think it’s a sale. By the way, if they are holding it and you are selling it, chances are it’ll go up for another year, so you’ll look dumb for a year. The chance of looking dumb or being terminally wrong in the end is what makes these things uncomfortable. The question is, do you dare to be different?
You can listen to the entire interview here:
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