Howard Marks’s Memo – The Best Of… opens with a simple idea that defines his career: “long-term investment success is best achieved through a string of consistently good returns and an absence of poor years, rather than by aiming for brilliant successes, getting there in some years and flopping in others.”
He has spent decades urging investors to “avoid losers (and losing years),” believing that “the best foundation for above-average long term performance is an absence of disasters.”
He warns that trying to swing for the fences leads to volatility and mediocrity. “Bold steps taken in pursuit of great performance can just as easily be wrong as right. Even worse, a combination of far above-average and far below-average years can lead to a long-term record which is characterized by volatility and mediocrity.”
Instead, he celebrates a pension fund’s strategy that “never had a year below the 47th percentile… or above the 27th percentile,” showing that consistent performance “will prove more effective than swinging for the fences.”
Marks extends this thinking to market psychology. “The mood swings of the securities markets resemble the movement of a pendulum.”
He explains that investor sentiment oscillates “between euphoria and depression, between celebrating positive developments and obsessing over negatives.”
His advice is to resist the herd and “refuse to fall into line with the herd behavior which renders so many investors dead wrong at tops and bottoms.”
He reminds readers that great investing isn’t about clairvoyance. “We accept that we’re among the many who do not know what the big-picture future holds.”
Instead, his philosophy focuses on preparation and process — not prediction. “It would be wonderful to be able to successfully predict the swings of the pendulum and always move in the appropriate direction, but this is certainly an unrealistic expectation.”
Marks’s memos return often to the theme of discipline over excitement. He contrasts “the credo of the home run” with his preferred approach: “never to tolerate poor performance, and certainly not to consider it an acceptable side-effect of swinging for the fences.”
He concludes that “what we think matters isn’t whether you hit a home run or win the Masters on any given day, but rather what your long-term batting average is.”
That steady philosophy — blending realism, humility, and a respect for cycles — runs through The Best Of…. As he writes, “superior investing requires superior insight, plus the willingness to deviate from the herd, the ability to control one’s emotions, and an unrelenting emphasis on the defining role of price in investment decisions.”
Those enduring truths form the heart of Howard Marks’s enduring message to investors.
You can read the entire memo here:
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