It is always best to be manage risk and anticipate potential dangers when navigating on the water. Passages such as this should only be attempted in shallow draft boats and in ideal weather. There's no need to run aground if the proper precautions are taken.
It's the same with investing.
Every investor should memorize this memo from Howard Marks, Chairman of Oaktree Capital Management, L.P.
http://www.oaktreecapital.com/MemoTree/Ditto.pdf
It is one of the best, most accessible discourses on risk that I have read to date. It is the product of a man whose prospect of future employment depends on his ability to manage money.
He opines:
Becoming more and less risk adverse at the right time is a great way to enhance investment performance. Doing it at the wrong time - like most people do - can have a disastrous effect on results.
Mr. Marks enlarges on this theme by addressing:
- The Real Estate Cycle
- Cycles and Risk
- The Source of Investment Risk
- The Cycle in Attitudes Toward Risk
- Coping with the Risk Cycle
- Risk and Return Today (2004 version)
- Risk and Return Today (2013 version)
- Getting Rid of Money
I printed out the article and placed the pile on the desk near the computer. I will turn over the topmost page on a weekly basis ... my financial Book of Kells.
You can subscribe to Mr. Marks' missives here:
http://www.oaktreecapital.com/Forms/memoSubscription.aspx
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