The Most Important Thing

Mr. Marks states that when he was attending client meetings over the years he noticed a pattern. He would say in one meeting that that such and such was the most important thing about investing and in later meetings he found himself referencing other items that he titled the most important thing to understand. Upon reflection about this pattern he decided to write a memo in July of 2003 that covered all these critical areas in his investing philosophy. This new book expands upon the ideas he covered in that original memo. Topics that are covered include: market efficiency, value, risk, investment cycles, contrarianism, finding bargains, patient opportunism, circle of competence, luck, avoiding pitfalls, etc... In short all the topics that a focus investor needs to understand and be able to place, and use, in their own mental models. What does Mr. Marks want his readers to gain from his book? Here are his own words from the introduction of the book: "I didn't set out to write a manual for investing. Rather, this book is a statement of my own investment philosophy. I consider it my creed, and in the course of my investment career it has served like a religion. These are the things I believe in, the guideposts that keep me on track. The messages I deliver are the ones I consider the most lasting. I'm confident their relevance will extend beyond today. You won't find a how-to book here. There's no surefire recipe for investment success. No step-by-step instructions. No valuation formulas containing mathematical constants or fixed ratios - in fact, very few numbers. Just a way to think that might help you make good decisions and, perhaps more important, avoid the pitfalls that ensnare so many. It's not my goal to simplify investing. In fact, the thing I most want to make clear is just how complex it is. Those who try to simplify investing do their audience a great disservice. I'm going to stick to general thoughts on return, risk and process..." Mr. Marks has succeeded in his goals in a brilliant manner. There is, quite simply, an incredible amount of wisdom between the covers of his book and an investor is doing them a disservice if they don't read, and re-read, this book. I will be placing it on my shelf right next to the great investments classics of Security Analysis, The Intelligent Investor, the Berkshire Hathaway annual reports, and Margin of Safety. Quite simply I can't recommend it highly enough.

This was an excellent book on core principles and ideas underlying investing. It is not a book on any particular investing strategy, but rather a book on his philosophy of investing, learned over the years from experience, from books, from experts he knows, and through supporting clients. It is structured as 18 chapters, each reflecting on a different aspect of investing … each of which is the next “most important thing.” Because, he says, ALL the “things” in the book are important. It covers topics such as what risk really is (his notion of risk a much more perceptive and useful idea than the unhelpful nonsense from finance theory, where risk is defined as market volatility), or how to identify value. The book is targeted more towards active investors who want to deliver superior performance than market indexes (i.e. significantly beat market averages), which is of course is hard to do. To achieve this, he says, investors need to have uncommon insight or “second level thinking,” and to form a clear understanding of value (so that one can understand the relationship of price to value in the context of any risks). If you don’t want to pursue above average performances, he points out, you’d be better off investing in an index fund (or, nowadays, its ETF equivalent) - which out-performs around 90% of active fund managers anyway. Outperforming the market index is a “big freaking deal,” which few investors do successfully or consistently. He offers a philosophy for key things to understand and reflect on if you want to go down that path … or if you want to be a better investor in general. I recommend the book.

Howard Marks is a value investing genius, with an astounding track record of ~20% p.a. returns for 25+ years. Therefore, I'm happy to read anything he is willing to share. In this book, he shares deeply toughtful insights, but in a somewhat dry, unengaging and repetitive text. Overall a must read, but don't expect an excellent literary experience. Although Marks shares his high level investment philosofy, he never shares enough to allow someone to understand exactly how he implements it in practice. How much safety margin? Which level of diversification? How to attribute probabilities to extreme events? Some nitty-gritty and real life examples would have transformed this book from a gospel to a more vivid and practical read. This could be accomplished while simultaneosly reducing the lenght of the book. It often feels verbose, with the same ideas repeated in different sections and paraphrased in multiple similar ways. Additionally, his habit of citing his own past writings is unnecessary and baloons the reading time without delivering much value to the reader.

I was getting really bored reading investing books because they were all saying more or less the same thing. I wanted to read an investing book that advance my investing knowledge beyond the basic stuff. This book did it. The amount of knowledge packed in it is worth gold. It really showed me just how wrong was I and many I know are in our investing strategy. Reading about the market cycles was an eye opener.

So many important things to consider if someone wants to reap the benefits of wall street. I highly recommend if anyone wants to be an investor not speculator.

This is truly the best book that I have ever read about inefficient markets. It is conceptually sound and simultaneously based on the wise experience of a portfolio manager over decades. In particular, Howard Marks' explanation of the cylicality of markets around their intrinsic valutions correctly explain market over reaction. Market over reaction offers the opportunity to profitably trade for the longer term. Acaemics call this cyclicality "ranges of bounded rationality." Practitioners call it "market sentiment." Bollinger attempts to measure it with "Bollinger Bands." (Bollinger Bands are +/- 1.5 standard errors of prices over a 200 day moving average.) Behavioral finance people account for this cyclicality based on human irrationality. Marks does a terrific job of calling into question the commonly accepted academic assumption: market prices ALWAYS equal intrinsic valuation. The academic community must relax this erroneous assumption. Until that community does so, the profession will continue to face an impossible task. That task is making progress on the core issues facing manking on how markets actually work in the real world. Empirical evidence to support Mark's incredibly sound concepts would substantiate his arguments. My research fills part of this gap. Combining Marks' concepts with Benoit Mandelbrot's research measurements promises the opportunity to achieve both lower fat-tailed risk and superior investment returns. Rawley Thomas President and Co-Founder of LifeCycle Returns Co-Editor of The Valuation Handbook The Valuation Handbook: Valuation Techniques from Today's Top Practitioners (Wiley Finance) and Co-Author of ValuFocus Investing ValuFocus Investing: A Cash-Loving Contrarian Way to Invest in Stocks (Wiley Finance)

Concise and informative.

the book arrived with a small (~2") cut on the front cover, which required some scotch tape. not a deal-breaker, but still... i'm already familiar with the book - one of the best of its genre.

This is a superb, and short, book that, to this eyes, is the best book on stocks investing since the canonical "The Intelligent Investor" was published three-quarters of a century ago (in 1948). I will defy those who may think this is an exaggeration, to name a book on stock trades so accurate, so simple, so easy to read and so practical like this one. Based heavily (and quoting often) Warren Buffett's letters to shareholders, Howard Marks explains his experience, and success, through the main points on investment. However, the author stays blissfully away from platitudes and hollow comments: no shortcut-to-get-rich here, no false promises. Far from it, Mr Marks lists constantly what's needed to succeed in the stock markets: loads of common sense, patience, discipline and a sound investment strategy based on the investor's ultimate goals. Only Warren Buffett managed to say it shorter: "buy good stocks cheap". And at only 177 pages this "Most Important Thing" is an example that consistent messages (possibly must) be delivered in a short fashion - 95% of what's written about the stocks markets nowadays is a copy-and-paste or a bromide; most is showy and inflated with formulas only a few can understand. Mr Marks effortlessly makes all that literature futile by getting down to the point in every chapter and by not bloating the book with not even one mathematical formula. Those starting in the mysteries of buying and selling shares do have here a wonderful introduction and sound advice at a rate of, at least, one per page. Those out there with investment experience, will still learn something new, without a doubt. As a coda, I'll recommend three other books that, after Graham's Intelligent Investor and Marks'Most Important Thing, do supply with priceless lessons on shares investment (this is just a short comment, I've reviewed these books individually too): Peter Lynch: "One up on Wall Street". A lont-time successful fund manager, Mr Lynch is perhaps the most enthusiastic of writers on shares, and manages to transmit this enthusiasm without losing a bit of accuracy. This book is a bit dated. Published in 1989 the "big" companies were then General Elecric, Ford and the big tobacco and these firms are used for the many examples the book contains, but its lessons are as good and useful for the third second half of the XX century as they are now. John Bogle: "The little book of Common Sense investing". Very short, but packed with sound advice. Also a very successful fund manager, Mr Bogle wrote a pamphlet on staying away from fashions and "trends" - his theory is that following a stock index for decades may sound dull, but it is a guarantee of profit. With very good entries on dividends too. Philip Fisher: "Common stocks and Uncommon Profits". Even older than the previous two, this minor classic was published in 1960 (one of Mr Fisher's favorite stocks was Motorola, then a transistors maker). It is written in the elegantly sober style of the mid-century and it is full of investment wisdom. As with the previous other two books, it offers no miracle and it states often that investment is a long-term activity.

Brilliant book, easy to reed simple yet complex way of thinking about financial markets

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Great book. Not for people new to investing. But if your knowledge is intermediate. This is a very useful resource to read. It's so good you would want to read it once a year. It would be really hard to make a lot of sense if you are absolute beginner in this topic.

Good book delivered in good condition