The Most important thing- Uncommon Sense for Thoughtful Investor

Name of the Book: - The Most Important Thing

Author: - Howard Marks

No of Chapters: -20

Number of Pages: - 180

Single sentence description of Book: - Excellent simple, easy and essential thoughts for success in stock market, but hard to practice.  

About the Author :- Howard Marks , the chairman and co-founder of Oaktree Capital Management, is renowned for his insightful assessment of market opportunity and risk

What this book is about: - Book is culmination of thoughts of Howard Marks which he expressed in form of memos to his clients when he was head of Oak Tree Capital. Author explains why second level thinking important in assessment of opportunities and risk in investment. Second level thinking generates great returns in the market by being a contrarian. It also explains that there are no proven rules for success in the market. It explains that markets can be efficient as well as inefficient at times and these patches of inefficiency in markets can give some good opportunities for great returns. Author puts more importance to value investing than grown investing.  The important relation of the price of the stock with its price has been well explained by the author. Author explains that the most profitable condition is when a valuable asset is bought at price well below its intrinsic value. Risk in the stock market has been well explained by three chapters namely understanding risk, recognising risk and controlling risk. Author dispels the notion that high returns are achieved through high returns.  Author also explained the importance of cycles by means of pendulum and elaborated that any person entering or exiting at the extreme end of cycle can generate some extra-ordinary returns or incur heavy losses. He has explained that every bull or bear run is started by very few people, which is further supported by some more people and at final stage, it is accepted by masses. How a decision of an investor is influenced by emotions like desire for more, fear of missing out, tendency to compare against others, influence of crowd and greed has been covered excellently. Author has put special emphasis on contrarianism and explained why  and when it does/doesn’t generate good returns in investment. The importance of finding bargains in the form of undervalued stocks is one of the most important things which helps the investor to generate great returns without much risk

Some special insights from the book

1.       Rather than knowing that where the market will go from its current position, it is more important to know our current position.

2.       Rather than doing the right things every time, it is more important not to do wrong
things

3.       If we avoid the losers, the winners will take care of themselves

4.        There are old investors, and there are bold investors, but there are no old bold investors

5.       Missing a profitable opportunity is of less significant than investing in a loser.

6.       There are two kinds of people who lose money; those who know nothing and those who know everything.

7.       Nothing goes in one direction forever, be it bull run or bear run

Overall Review: - Book is a great collection of the some of the most important things which are mostly neglected by investor community. Must reads book for investors                                                               

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