Howard Marks

“In order to outperform, by definition, you have to depart from the crowd. You have to hold a different position.”

“There’s nothing you can do in the interest of being above average that does not expose you to the risk of being below average.”

“Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios which frequently appear downright imprudent in the eyes of conventional wisdom.”

“Memory – and the resulting prudence – always comes out the loser when pitted against greed.”

“Pro-cyclical behavior is one of the greatest and one of the most frequent mistakes.”

“We should be very cautious in what we expect of our prescience.”

“When most people think about the future, they ignore that the future is a distribution of possibilities.”

“One of the important factors behind the fluctuation between bull and bear markets, between booms and crashes and bubbles, is that investor memory has to fail us – and fail universally – in order for the extremes to be reached.”

“The pendulum of investment psychology is constantly fluctuating between optimism and pessimism, between greed and fear, between credulousness and skepticism, between risk tolerance and risk aversion.”

“The truth is markets are made up of people, with their emotions, insecurities, their tendency to go to extremes, and their other foibles. Thus, they often make mistakes and swing to erroneous extremes.”

“I believe denying clients the ability to be hyper-traders is doing them a favor. Most people are not adept enough to take advantage of short-term mis-valuations, and I put myself in that category.”

“Waiting patiently is an essential part of being an investor. And when you do take action, do it dynamically, forcefully.”

“I believe it is highly possible to improve your long-term results by adjusting your investment position at the extremes of the cycle. Not that often. But at the extremes.”

“I don’t write to make investing easy. I write to show how hard it is so that people won’t try tricks that they can’t do.”

“Superior investing is taking advantage of the errors of others.”

“To be a great investor, you must have an approach, and you have to stick to it, despite the times when it’s not working.”

“One of the astute things I was taught is that on average, the average investor does average before fees, and below average after fees.”

“Smart investing doesn’t consist of buying good assets, but of buying assets well.”

“Investors are right and wrong all the time for the wrong reasons.”

“Investing performance is what happens when events collide with an existing portfolio.”

“The important thing to remember about investing is that it is not sufficient to set up a portfolio that will survive on average. The key is to survive at the low ends.”

“The most important lessons in investing are learned in the tough times.”

“No investment vehicle should offer more liquidity than is afforded by the underlying assets.”

“Most investors learn their lessons the hard way.”

“For some reason, because of the way investor psychology works, people switch from only seeing the good to seeing only the bad.”

“Selling an asset is a decision that absolutely must not be considered in isolation.”

“The past has relevance, but it’s not absolute.”

“I believe it’s hard to predict the future. It’s not that hard to predict the present. In other words, it’s not that hard to understand what’s going on today.”

“It’s not what you buy, it’s what you pay. And success in investing doesn’t come from buying good things, but from buying things well. And if you don’t know the difference, you’re in the wrong business.”

“One of the biggest mistakes you can make is to think that overpriced and going down tomorrow are synonymous. Markets that are overpriced often keep going.”

“Investing is a funny business. It’s really easy to be average. Just buy an index fund. It’s really hard to be above average.”

“Risk cannot be quantified, even after the fact.”

“The concept of surviving on average is irrelevant. You have to survive every day. Which means, really, that you have to survive on the bad days.”

“It’s not earnings changes that cause stock price changes, but earnings changes that come as a surprise.”

“It’s important to recognize that the riskiness of investing comes only partly from the things you invest in. A lot of the risk comes from the behavior of the participants.”

“Extrapolation is usually right, but not valuable, and predictions of deviation from trends are potentially profitable but rarely right. So far, macro-economic forecasting doesn’t represent the path to superior investments.”

“There’s no asset so good that it can’t be overpriced and become a bad investment, and very few assets are so bad they can’t be underpriced and be a good investment.”

“Almost any asset can be risky or safe, depending on how other investors treat it.”

“There’s no such thing as superior investing without superior judgment.”

“I believe the market accurately reflects not the truth, which is what the efficient market hypothesis says, but it accurately and efficiently reflects everybody’s opinion as to what’s true.”

“You have to buy an asset at a price that is attractive and reasonable for its value.”

“If the discernment of value could be reduced to an algorithm and taught, then everybody would be Warren Buffett.”

“Investing is a hard area for most people to figure out what to do.”

“I’ve heard it said that an economist is a portfolio manager who never marks to market.”

“I’ve listened to a lot of economic briefings, and I’ve had a lot of visits from economists, and I’ve never encountered one who was right consistently.”

“On average, the average large-stock fund manager produces average returns before fees and below-average returns after fees. So compared with after-fee returns, an index fund is superior.”

“If you think Treasuries have no risk and high yield bonds have risk, the yield spread is there to compensate for the bearing of that incremental risk. The question is whether it is adequate.”

“When things go badly, people become cautious. Then their caution causes things to go well, and when things go well, they become incautious. I think that’s a forever cycle.”

“I spend a great deal of my personal time trying to figure out one thing, which is, at a given point in time, how should you balance aggressiveness and defensiveness in your portfolio.”

“Being “right” doesn’t lead to superior performance if the consensus forecast is also right.”

“Most of us have roughly the same ability to predict the future. The trouble is, being right as often as the average forecaster won’t produce superior results.”

“Extreme predictions are rarely right, but they’re the ones that make you big money.”

“Potentially profitable, nonconsensus forecasts are very hard to believe in and act on for the simple reason that they are so far from conventional wisdom.”

“Investment survival has to be achieved in the short run, not on average in the long run.”

“I think that the business about volatility being risk is a con job which was perpetrated primarily because volatility is machinable.”

“There’s no such thing as a good idea or bad idea in the investment world. It’s a good idea at a price, it’s a bad idea at a price.”

“Whenever we consider an investment, we think just as much or more about what can go wrong as about what can go right, and we put the avoidance of losses on a high pedestal.”

“The point is to consider risk control, loss avoidance, at least as important as return.”

“The market doesn’t know everything, but it doesn’t know nothing, and knowledge is cumulative. The market knows stuff now that it didn’t know forty years ago, so it’s harder to outperform.”