Howard Marks: Fewer Losers Not More Winners

This is captured in his warning: “The riskiest thing in the world is the belief that there’s no risk.” This is especially pertinent for those who, like the hypothetical Sam, find comfort in the long-term average returns of the S&P 500.

While Marks concedes that “in the long run, you’re right about the S&P,” he immediately cautions against complacency, noting that “it doesn’t always return 10%.” His evidence is a sobering historical fact: “if you bought the S&P when the PE ratio was 23… your annualized return over the next 10 years was between 2 and minus 2.”

This underscores a core tenet of Marks’ philosophy: the relationship between price and value is everything. “Sometimes they hate them, sometimes they love them. When they love them too much, you should expect them to probably go down. That sounds like a bull market or a bubble. And when they hate them too much, you should expect them to go up. That sounds like a bear market or a crash. And so you have to do the opposite.”

This contrarian discipline is simple in theory but difficult in practice because it requires acting against powerful emotions. As Marks puts it, “when the time comes to invest, you won’t want to.” The same fear or pessimism that creates bargain prices also makes them terrifying to purchase.

For Marks, successful investing isn’t about heroic predictions but about consistent, clinical execution. He advocates for a measured approach, stating, “the operative continuum to think about is the continuum that runs from aggressive to defensive.”

His own strategy prioritizes durability over home runs, aiming for a record that is “always good, sometimes great, never terrible.” This leads to his ultimate conclusion on strategy: you should go for “fewer losers, not more winners.” In an uncertain landscape, avoiding major mistakes through discipline and a clear understanding of market cycles is often the most reliable path to long-term success.

You can watch the entire interview here: