Investing Wisdom and Philosophy

Key Concepts of Successful Investing

• Buy Assets for Less Than They're Worth: Success in investing is buying things for less than their intrinsic value.
• Controlling Risk: One of the most important aspects of investing.
• Contrarian Approach: Often the best opportunities arise from going against the trend.

The Evolution of Investment Philosophy

• Howard Marks wrote 'The Most Important Thing' to share his investment philosophy.
• His philosophy is built from experiences and learnings over decades.

Influential Reads and Ideas

• Fooled by Randomness by Nassim Nicholas Taleb: Highlights the role of randomness in investing.
  • Emphasizes understanding that outcomes may not reflect decision quality due to randomness.
• Decision-Making Under Uncertainty by C. Jackson Grayson: Outcome does not always indicate decision quality.
• John Kenneth Galbraith's Work: Emphasizes skepticism in macro forecasts.
• The Loser's Game by Charlie Ellis: Investing is often about avoiding mistakes rather than making exceptional choices.
• Security Analysis by Graham and Dodd: Bond investing is a negative art, focusing on avoiding defaults.

Investment Philosophy at Oaktree

• Risk Control: Core to Oaktree's strategy.
• Consistency Over Time: Focus on stable returns rather than volatile high returns.
• Avoidance of Macroeconomic Forecasts: Investing decisions are not based on predictions of the market.
• Defensive Investing: Avoid losers to ensure overall success.

Core Investment Thoughts

• Role of Luck: Luck plays a significant part in outcomes.
• Market Efficiency: Market often prices things correctly due to collective investor effort.
• Index Funds: Good for average investors but doesn’t eliminate investment risk.
• Market Cycles and Trends: Awareness of cycles is crucial; today's market shows risk-taking due to low returns on safe investments.

Important Adages

• First Innovator, Then Imitator, Then Idiot: Trends often end in overvaluation.
• Six-Foot-Tall Man Drowning in Five-Feet Stream Average: Average safety is not enough.
• Too Far Ahead Equals Being Wrong: Timing is crucial in investing.

Challenges and Opportunities in Investing

• Maverick and Contrarian Investing: Critical to finding undervalued investments.
• Distressed Debt Opportunities: Buying distressed debt at a value can lead to high returns.
• Scaling Investment Strategies: Managing more money can dilute performance.

Current Market Observations

• Chasing Yield: Many investors are moving into riskier investments due to low returns on safe assets.
• Market Efficiency Changes: Potential for active investing advantages if efficient market dynamics change due to less active analysis.

Conclusion

• Investing requires a combination of skill, judgment, and a cautious approach.
• Avoiding losses and ensuring consistent strategy is key to long-term success.