A key component of becoming a successful investor, writes Morgan Housel of the Collaborative Fund, is the “ability to be comfortable being uncomfortable.” Investors, he says, “have a fascination with no-brainers, obvious decisions, and easy money. The phrases should be chapter titles in a book on the ease of deluding yourself.” He argues that finding well-performing investments requires above-average intelligence but also the willingness to “endure more discomfort and uncertainty than others.” Housel cites a comment by former Benchmark partner Andy Rachleff: “What most people don’t realize is that you don’t make money if you’re right in consensus. The only way […]
When evaluating an equity fund’s volatility, more attention should be paid to “max drawdown”—the maximum decline a fund has experienced from peak to trough over a given period—than to standard deviation (how far returns move from the average). This according to a recent article in The Wall Street Journal. The article notes that a higher standard deviation generally indicates greater volatility. The stock market’s current standard deviation of 18%, it explains, indicates that “the majority—though not all—of the market’s annual returns have been between 28% and minus 8%. But, because there can be many years of negative returns that well […]
Last month, Bloomberg’s Erick Schatzker sat down with Howard Marks, co-chairman of Oaktree Capital, to discuss the fund manager’s investment approach. With respect to whether the now-stretched equity valuations make for what some are calling “treacherous” conditions, Marks comments, ” The riskiest thing in the world is to believe there’s no risk. When people talk about risk in the market, that’s a healthy thing.” According to Marks, however, there is an incongruity between words and actions. “The problem,” he said, “is that even though most people are not thinking bullish, most people are acting bullish.” Many people are still […]
Howard Marks, Oaktree’s CEO, recently wrote an article for Barron’s on investment risk, and how to quantify it. His answer: you simply can’t.
In the investing world, the standard thinking seems to be that the older you get, the less risk you should take on. But Charles Schwab’s Liz Ann Sonders says that’s not always the case.