Marks identifies the biggest investor mistake as believing something can outperform forever, leading to overvaluation.
“The the biggest I thought I've spent a lot of time thinking about the biggest mistake that investors make. It is the belief that something can go up more than something else forever.”
Marks describes Oaktree's core philosophy as taking advantage of the mistakes of others.
“Bob said, essentially, what we do is take advantage of the mistakes of others. And that caused me to write a memo shortly after entitled, it's all a big mistake.”
Marks explains excess returns require buying from sellers making mistakes, which nobody volunteers for.
“It requires cooperation for someone who's willing to sell something for less than it's worth. And who volunteers for that job? We want to buy from sellers who are making mistakes.”
Marks argues good investing is not just buying good things but buying things well at the right price.
“it's not what you buy, it's what you pay. And good investing is not just a function of buying good things, but of buying things well.”
Marks distinguishes risk control from risk avoidance, emphasizing intelligent risk-bearing is integral to good returns.
“Exposing yourself to the risk of loss is integral in trying to have a good investment return. So, you know, even though our investment philosophy, stresses, risk control, we're not talking about risk avoidance.”
Marks states if you avoid losers in equities, winners will take care of themselves, his core motto.
“And it happens to say in there, simply put what the pension funds record tells me is that in equities, if you can avoid the losers and losing years, the winners will take care of themselves.”
The Investor’s Podcast
“And when we started Oaktree in 1995, I wrote that down, and that became our motto and still is.”
Marks defines real investment accomplishment as making money with controlled risk, not just returns.
“To me, the real accomplishment is making money with the risk under control. And that's what thinking about risk, I think, helps you do.”
Marks argues risk cannot be quantified even after the fact, using a doubling investment as example.
“Or was it a really clever thing that nobody else had figured out where you were sure to double your money? And the answer is you can't tell.”
Marks argues good investing is not buying good things but buying things well.
“And there's a really important lesson in that, that good investing is not a matter of buying good things, but buying things well.”