Marks argues investors should tailor strategy to whether they fear losing money or missing opportunities, and says research advantage is hard to gain since many smart people already do it.
“ [ 4 ] Marks focuses on risk management and says that investors should set investment strategy according to their personal situations and ask themselves whether they worry more about the risk of losing money or the risk of missing an opportunity. [ 4 ] Marks believes that it is hard to gain an investment advantage through research since so many smart people are doing it already; the ways to get an advantage are through better inferring the consequences implied by current company data, managing the psychology of investing, and assessing the present stage of the business / market cycle. He hopes to have average returns during a bull market , while minimizing losses during bear markets due to his belief that losses do more harm than any benefit investors obtain from gains. Marks does favor using market timing strategies to have cash available to be invested during a downturn. [ 5 ] Marks notes that it is important for investors to admit what they don't know instead of believing something is certain. He aims for a ”
Marks quotes Feynman that physics would be harder if electrons had feelings, unlike human investors.
“Richard Feynman, the great physicist, said that, physics would be much harder if electrons had feelings. We walk in the room, we turn on the light switch, the lights go on every time.”
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.”
His team bought at market lows because geographic distance from New York prevented emotional contagion.
“Our team was able to buy at the market’s lows because they weren’t in New York, where everyone was sharing horror stories and depressing each other.”
Other investors' emotions become advantage or threat depending on your emotional discipline.
“Other investors’ emotional swings can be a threat… or a competitive advantage. What determines which one it is, is your ability to keep a cool head.”
Crisis psychology collapses the distinction between what's possible and what's probable.
“During the crisis, any optimistic scenario was dismissed as naive. Everything bad seemed possible, and therefore probable. The distinction between possibility and probability vanished. That’s the real psychological poison in markets.”