View Risk for what it is and you open the door to Profit:
My belief is that because the system is now more stable, we’ll make it less stable through more leverage, and more risk-taking.
― Myron Scholes
1/23
My belief is that because the system is now more stable, we’ll make it less stable through more leverage, and more risk-taking.
― Myron Scholes
1/23
2/
“The received wisdom is that risk increases in the recession and falls in booms. In contrast, it may be more helpful to think of risk as increasing during upswings, as financial imbalances build up, and materializing in recessions.”
― Andrew Crockett
“The received wisdom is that risk increases in the recession and falls in booms. In contrast, it may be more helpful to think of risk as increasing during upswings, as financial imbalances build up, and materializing in recessions.”
― Andrew Crockett
3/
Risk means uncertainty about which outcome will occur and about the possibility of loss when the unfavorable ones do.
― Howard Marks
In theory, there’s no difference between theory and practice, but in practice there is.
― Yogi Berra
Risk means uncertainty about which outcome will occur and about the possibility of loss when the unfavorable ones do.
― Howard Marks
In theory, there’s no difference between theory and practice, but in practice there is.
― Yogi Berra
4/
It is also critical to spend time trying to fully understand the incentives at work in any given situation. Flawed incentives can often explain irrational, destructive, or counterintuitive behaviors or outcomes.
―Christopher Davis
It is also critical to spend time trying to fully understand the incentives at work in any given situation. Flawed incentives can often explain irrational, destructive, or counterintuitive behaviors or outcomes.
―Christopher Davis
5/
Silos are a double-edged sword. A narrow focus leads to potentially superior knowledge. But the concentration of effort within rigid boundaries leaves a strong possibility of mispricings outside those borders...
Silos are a double-edged sword. A narrow focus leads to potentially superior knowledge. But the concentration of effort within rigid boundaries leaves a strong possibility of mispricings outside those borders...
6/ ...Also, if others’ silos are similar to your own, competitive forces will likely drive down returns in spite of superior knowledge within such silos.
― Seth Klarman
― Seth Klarman
7/
The math behind the compounding of negative returns helps ensure this outcome (e.g., a 40 percent loss in one year requires a return of 67 percent to fully recover).
― Joel Greenblatt
The math behind the compounding of negative returns helps ensure this outcome (e.g., a 40 percent loss in one year requires a return of 67 percent to fully recover).
― Joel Greenblatt
8/
- Risk can’t be eliminated, it just gets transferred and spread.
- No rule always works. Can't control the environment, circumstances rarely repeat. Psychology plays a major role in markets, and because it’s highly variable, cause-and-effect relationships aren’t reliable.
- Risk can’t be eliminated, it just gets transferred and spread.
- No rule always works. Can't control the environment, circumstances rarely repeat. Psychology plays a major role in markets, and because it’s highly variable, cause-and-effect relationships aren’t reliable.
9/
- Inefficient markets do not necessarily give their participants generous returns. Rather, it’s my view that they provide the raw material (mispricing) that can allow some people to win and others to lose on the basis of differential skill.
- Inefficient markets do not necessarily give their participants generous returns. Rather, it’s my view that they provide the raw material (mispricing) that can allow some people to win and others to lose on the basis of differential skill.
10/
- Investors with no knowledge of (or concern for) profits, dividends, valuation or the conduct of business simply cannot possess the resolve needed to do the right thing at the right time.
- Investors with no knowledge of (or concern for) profits, dividends, valuation or the conduct of business simply cannot possess the resolve needed to do the right thing at the right time.
11/
- No asset is so good that it can’t become a bad investment if bought at too high a price. And there are few assets so bad that they can’t be a good investment when bought cheap enough.
- The possibility of permanent loss is the risk I worry about.
- No asset is so good that it can’t become a bad investment if bought at too high a price. And there are few assets so bad that they can’t be a good investment when bought cheap enough.
- The possibility of permanent loss is the risk I worry about.
12/
- The degree of risk present in a market derives from the behavior of the participants, not the securities, strategies, and institutions.
- Recognize risk through price, not the quality of the investment.
- The degree of risk present in a market derives from the behavior of the participants, not the securities, strategies, and institutions.
- Recognize risk through price, not the quality of the investment.
13/
- Risk is lowest when everyone believes the risk is high. Because investors have reduced the price to the point it is no longer risky. Low price increases the chance of good outcomes and higher returns, smaller losses.
- Risk is lowest when everyone believes the risk is high. Because investors have reduced the price to the point it is no longer risky. Low price increases the chance of good outcomes and higher returns, smaller losses.
14/
- The reverse is also true. When everyone believes something embodies no risk, they usually bid it up to the point where it’s enormously risky.
- High-quality assets can be risky, and low-quality assets can be safe. It’s just a matter of the price paid for them.
- The reverse is also true. When everyone believes something embodies no risk, they usually bid it up to the point where it’s enormously risky.
- High-quality assets can be risky, and low-quality assets can be safe. It’s just a matter of the price paid for them.
15/
- It’s only when the tide goes out that you find out who’s been swimming naked.
- The tide cannot come in or go out forever.
- The majority of investors think quality, not price, determines if something is risky.
- Fear of missing out causes investors to forget risk.
- It’s only when the tide goes out that you find out who’s been swimming naked.
- The tide cannot come in or go out forever.
- The majority of investors think quality, not price, determines if something is risky.
- Fear of missing out causes investors to forget risk.
16/
- To be successful you need to pay attention to many different aspects, omit one and the result is likely to be less than satisfactory.📷
- “Experience is what you got when you didn’t get what you wanted.”
- To be successful you need to pay attention to many different aspects, omit one and the result is likely to be less than satisfactory.📷
- “Experience is what you got when you didn’t get what you wanted.”
17/
- Good times teach only bad lessons: that investing is easy, that you know its secrets, and that you needn’t worry about risk.
- No idea can be any better than the action taken on it.
- You can’t do the same things others do and expect to outperform.
- Good times teach only bad lessons: that investing is easy, that you know its secrets, and that you needn’t worry about risk.
- No idea can be any better than the action taken on it.
- You can’t do the same things others do and expect to outperform.
18/
- If your behavior is conventional, you’re likely to get conventional results—either good or bad.
- Being too far ahead of your time is indistinguishable from being wrong.
- People should like something less when its price rises, but in investing they often like it more.
- If your behavior is conventional, you’re likely to get conventional results—either good or bad.
- Being too far ahead of your time is indistinguishable from being wrong.
- People should like something less when its price rises, but in investing they often like it more.
19/
Efficient-market-believing professor takes a walk with a student:
Student: “Isn’t that a $10 bill lying on the ground?”
Professor: “No, it can’t be a $10 bill, if it was, someone would have picked it up by now.”
Professor walks away and student picks it up and has a beer.
Efficient-market-believing professor takes a walk with a student:
Student: “Isn’t that a $10 bill lying on the ground?”
Professor: “No, it can’t be a $10 bill, if it was, someone would have picked it up by now.”
Professor walks away and student picks it up and has a beer.
20/
- The most dangerous investment conditions generally stem from psychology that’s too positive.
- Quantification often lends excessive authority to statements that should be taken with a grain of salt.
- The most dangerous investment conditions generally stem from psychology that’s too positive.
- Quantification often lends excessive authority to statements that should be taken with a grain of salt.
21/
- Greatest risk doesn’t come from low quality or high volatility. It comes from paying prices that are too high.
- High-quality assets can be risky and low-quality assets can be safe.
- Quite often “high-quality” companies sell for high prices, making them poor investments.
- Greatest risk doesn’t come from low quality or high volatility. It comes from paying prices that are too high.
- High-quality assets can be risky and low-quality assets can be safe.
- Quite often “high-quality” companies sell for high prices, making them poor investments.
22/
- Over a full career, most investors’ results will be determined more by how many losers they have, and how bad they are, than by the greatness of their winners.
- Controlling risk is a permanent task.
- Over a full career, most investors’ results will be determined more by how many losers they have, and how bad they are, than by the greatness of their winners.
- Controlling risk is a permanent task.
23/
- The road to long-term investment success runs through risk control more than aggressiveness. Skillful risk control is the mark of a superior investor.
- The stock market will have more good years than bad years.
Notes from The Most Important Thing by Howard Marks
- The road to long-term investment success runs through risk control more than aggressiveness. Skillful risk control is the mark of a superior investor.
- The stock market will have more good years than bad years.
Notes from The Most Important Thing by Howard Marks
جاري تحميل الاقتراحات...