Aaditya Chhajed, CA, CFA

The below post is a follow-up article on lessons from the book The Most Important Thing by Howard Marks - Uncommon Sense for the Thoughtful Investor.  You can read the previous posts here -  Part 1 ,  Part 2 In this post, I have discussed 5 most important things as follows; Combating Negative Influences Contrarianism Finding bargains Patient Opportunism Knowing What You Don't Know 1. Combating Negative Influences The desire for more (i.e. greed) The fear of missing out The tendency to compare against others The influence of the crowd (i.e.herd behavior) These factors have a negative impact resulting in mistakes, which are frequent, widespread, and recurring. Weapons to marshal on your side to increase your odds: A strongly held sense of intrinsic value A thorough understanding of the insidious effect of psychology on the investing process Willingness to look wrong while the market goes from misvalued to more misvalued Like-minded friends ...

The below post is a follow-up article on lessons from the book The Most Important Thing by Howard Marks - Uncommon Sense for the Thoughtful Investor. You can read the previous post Part 1 . In this post, I have discussed: Risks Being attentive to cycles Awareness of the Pendulum 1. Understanding, Recognizing and Controlling Risks What we can control is a risk. We here far too many people saying, "Riskier investments provide higher returns. If you want to make more money, the answer is to take more risk." But riskier investments absolutely cannot be counted on to provide higher returns. It's simple - if riskier investments reliably produced higher returns, they wouldn't be riskier! High risk - high return notion has brought a lot of misery to a lot of people due to the notion that more risk leads to making more money. In reality risks include: Falling short of one's goals Underperforming the benchmark/ inflation Illiquidity of the investments...

Global market indices are down almost in the range of 20-25% from the peak, we must believe this too shall pass and good times for (select) equities are not too far.  Amidst this extreme volatility in my portfolio and client meetings, I managed to read a book by Howard Marks; The Most Important Thing, Uncommon Sense for the Thoughtful Investor- Uncommon Sense for the Thoughtful Investor . He is an extremely successful investor and a founder of Oaktree Capital Management.  I have divided the lessons from this book in four parts. This post is part 1. I will post the remaining lessons very soon! 1. What is Second-level thinking?   First-level thinking says, "It's a good company; let's buy the stock." Second-level thinking says, "It's a good company, but everyone thinks it's a great company, and it's not. So, the stock is overrated and overpriced; let's sell."  There are numerous examples like this to understand what is exactly...

Why do you really need an investment advisor? Let’s talk about mutual funds. In the era of ET Money, PayTM where you can invest on the go with a single click, do you really need a piece of expert advice? No, you don’t unless you are willing to carry out research on your own of at least 2500+ mutual fund schemes offered by 44 fund houses in India. An ideal investment advisor won’t recommend a mutual fund scheme just because he has the distribution license with him or which earns him the highest commission. An investment advisor should have carried out a full-fledged research showing the rationale to invest in the scheme. Anyway, you should always ask your investment advisor about his research in terms of: Legacy of the mutual fund company Background, history of the fund manager O bjectives of the mutual fund scheme The risk profile of the mutual fund scheme (Always remember – you can control the risk but not the returns) R eturns of the mutual fund the s...