Tags: Marks | stock | invest | herd

Oaktree's Howard Marks: Successful Investors Ignore the Herd

By    |   Thursday, 10 April 2014 01:13 PM

Oaktree Capital's Howard Marks is not only unafraid to be different from the crowd, he thinks it's the best way to be successful in investing.

In a follow-up to his 2006 "Dare to Be Great" client memo, the Oaktree founder and billionaire states, "Everything that's important in investing is counterintuitive, and everything that's obvious is wrong."

Marks offers some fresh suggestions on how institutional investors can be winners, but some of the advice probably makes great sense for the mom-and-pop investor crowd as well.

"Passive investors, benchmark huggers and herd followers have a high probability of achieving average performance and little risk of falling far short," he writes.

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"The real question is whether you dare to do the things that are necessary in order to be great. Are you willing to be different, and are you willing to be wrong? In order to have a chance at great results, you have to be open to being both."

According to Marks, to get a chance at amassing the big money, an investor must be willing to assemble a portfolio that is different from others.

Because stocks that have already been doing well are unlikely to be bargains, he says it is probably best to look elsewhere for the next big winners.

In his estimation, "bargains are usually found among things that are controversial, that people are pessimistic about and that have been performing badly of late."

Almost everything about successful investing is a "two-edged sword," in Marks' view.

Some of the dilemmas he mentions are — if you invest you will lose money if the market declines, but if you don't, you will miss out on gains if the market rises. In addition, if you concentrate your portfolio, your mistakes will hurt you, but if you diversify, the potential payoff will be diminished.

In the end, Marks advises his clients not to worry about the opinions of others if they truly want to dare to be great. "This is really the bottom line: not whether you dare to be different or to be wrong, but whether you dare to look wrong."

In a volatile market, even the best of the best can sometimes be wrong.

The New York Times sparked a lot of commentary this week when it published an article speculating whether famous stock picker Warren Buffett has lost his touch.

The article concludes that most investors can match the best performance of the stock market by simply buying a broad-market index fund — and claims that for most people, they are better off doing just that.

Editor's Note: Weird Trick Adds Up to $1,000 to Your Social Security Checks

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Oaktree Capital's Howard Marks is not only unafraid to be different from the crowd, he thinks it's the best way to be successful in investing.
Marks, stock, invest, herd
452
2014-13-10
Thursday, 10 April 2014 01:13 PM
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