The Most Important Thing (Howard Marks)

Trader's Library #66 · Investing and the stock market. The wisdom of one of the best investors on risk and second-level thinking.

Author: Howard Marks · Original: The Most Important Thing · Year: 2011 · Usefulness for traders: ★★★★☆

What it's about

The co-founder of Oaktree Capital brings together the key ideas from his famous memos to investors: second-level thinking, understanding risk, market cycles, the pendulum of sentiment and awareness of what we don't know.

What it gives a trader

Second-level thinking is a key idea for traders too: it's not enough to know the data is good; you need to know what the market expected and what's already priced in. Marks also writes brilliantly about risk as the probability of permanent loss, not volatility.

Lessons for traders

• ask not “what will happen” but “what's already priced in”
• risk is greatest when everyone thinks there isn't any
• market sentiment swings like a pendulum between extremes (herding, Atlas of biases #31)

What to watch out for

Written from a long-term investor's perspective. No specific methods.

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

Navigation

← #065 William O'Neil: How to Make Money in Stocks and 24 Essential Lessons · Library index · #067 Principles (Ray Dalio) →

Educational content, not investment advice. The book description is my own summary and assessment, not quotations. Edition details were checked in catalogues and bookshops, and where there was doubt I said so plainly.