Marks argues average returns with below-average risk are equally significant but overlooked because only returns are visible.
“achieving an average return with below average risk is an equally significant accomplish, but easily overlooked because only the risk is evident, only the return is evident.”
“Was he was in every year for fourteen years in a row. He was between the twenty seventh and the forty seventh percentile measuring from the top.”
Marks advocates cutting off the bottom tail rather than shooting for the top tail to achieve best long-term performance.
“Approach is very simple, cut off the bottom tail. That's what this guy in the Midwest did.”
Marks says beating competitors requires either more winners or fewer losers, rarely both simultaneously.
“I can have more of the things that go up a lot than you do or less of the things that go down a lot than you do.”
Marks states most equity mutual funds underperform the S&P 500 even before fees.
“if you look at equity mutual funds, most equity mutual funds don't even do as well as the S and P five hundred before fees,”
Marks notes gold returned 7.7% annually since 2010 versus 12.7% for S&P 500 over the same period.
“And if you bought the S and P at the same time, you've had a 12.7% rate of return.”
Marks says General Mills achieved fourth percentile over fourteen years by staying between twenty-seventh and forty-seventh annually.
“for the fourteen years overall, they were in the fourth percentile. Now that's incredible math. You would say, well, if you bounce back in '40 between '27 47, on average, you're probably about 37.”
Marks cites math where consistently staying between 27th and 47th percentile for fourteen years produced overall fourth percentile performance.
“So solidly in the second quarter for fourteen years in a row. But interestingly, as a result, for the fourteen years overall, they were in the fourth percentile.”
Marks reports Oaktree's high yield default rate is roughly one-third the market average over forty years.
“And so, over the last forty years, on average, something like 3.6 or 3.7% of all high yield bonds have gone into default every year, and our default rate has been roughly a third.”