Investing Lessons From Howard Marks

Howard Marks isn’t shy about teaching people how to invest. I have posted an interview with him previously and have recently enjoyed learning from this series. I am also a pretty regular reader of his investment letters to shareholders (I highly recommend you read the latest It’s All A Big Mistake) which I reviewed earlier this week and look through the others. There are a lot of good insights for retail investors in there.

My favorite is the first one about strategies for retail investors and ignoring Europe. This is important of course as I’ve discussed before in relation to making investment decisions and ignoring the daily barrage of jobs reports and such as it pertains to your stock selection.

What makes more sense is to have a general feeling about where the economy is going – just observe what is happening in your life, your business, with your family and make investments accordingly. The rule of thumb here (to quote Warren Buffett) is “The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.”

Of course this needs to be kept in perspective as longer time horizons are better suited to making higher returns and shorter time horizons are better suited to making lower returns. Investors should be aware of this general rule and try not to go against the rule.

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