As someone who’s been investing for many years, I’ve realised that investing is a psychological battlefield, where the hardest decisions are rarely about numbers and valuations—they’re about emotions. Howard Marks captures this dilemma perfectly in The Most Important Thing, where he reflects on the tech bubble and the 2008 financial crisis.
As he puts it, “As hard as it was for most people to resist buying in the tech bubble, it was even harder to resist selling—and still more difficult to buy—in the depths of the credit crisis.”
This is the core struggle for any investor: overcoming the urge to follow the herd. It’s easy to get swept up when markets are soaring, when “the pundits are positive, the rationale is widely accepted, prices are soaring, and the biggest risk takers are reporting huge returns.”
But it’s even harder to stay rational when the market is in freefall, when losses feel unlimited, and “Armageddon actually seemed possible.”
The truth is, no one is immune. Marks warns us: “Investors who believe they’re immune to the forces described in this chapter do so at their own peril.” If entire markets can be moved by collective emotions, why should any individual believe they can simply rise above them? If a bull market can make professionals overlook reality, why wouldn’t it do the same to us?
There’s no formula to protect against these cycles, no foolproof strategy to time the market, no “magic pill that will protect you against destructive emotions.”
The only way forward is to recognize these forces for what they are. To have the courage to resist them. And to remember, as Charlie Munger wisely said, “It’s not supposed to be easy.”
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