In this interview with Infomoney, Howard Marks highlights the importance of emotional control and risk tolerance in investing. The biggest mistake, according to Marks, is taking on too much risk, leading to panic selling during market downturns. This is because investors, unable to handle the volatility, sell their investments at low points, locking in losses.
Here’s an excerpt from the interview:
Marks: The biggest mistake people make is they take on too much risk and when and they get into a tough period and things go down and they can’t live with it so they panic and they sell when things are down.
That is the biggest mistake that one can make because when things are depressed, most things are selling for less than their worth.
Why would you sell them at that point?
But people do because their emotions force them to do so because they took on risk they couldn’t live with.
And so I hope that between you and me and all the other commentators we can convince people to take on a portfolio which you can live with in the tough times.
It’s easy to get through the good times. But it’s not easy to get through the tough times.
And you know even in Brazil people sold things. Some people made a big mistake.
And so I have avoided your question, is 60/40 the right number?
On average young people who can hold stably for a long time, maybe they should even have more in risk securities. The beauty of fixed income and bonds today is that they are a good stable safer substitute for risk assets today than they have been in a long time.
You can watch the entire discussion here:
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
