After reading Howard Marks' (The Most Important Thing), my inner feeling is not one of ecstatic joy at finding an 'investment bible', but rather a serene realization and awe. This book does not provide a get-rich-quick scheme, nor does it present complex mathematical models; it is more like a seasoned sage, telling us in a calm manner the simple truths about investing, human nature, and risk beyond the noisy market.
1. The 'Way' and 'Technique' of Investment: From Pursuing Skills to Cultivating the Mindset
When we first enter the investment field, we often become obsessed with finding various 'techniques'—technical analysis, news channels, popular tracks, eager to discover a 'holy grail' that can consistently beat the market. Mr. Marks wakes us up right from the beginning: if you want to achieve average returns, just buy index funds; and if you want to outperform the market, you must possess 'second-level thinking'.
What is 'second-level thinking'? It is not just about being smart, but rather the ability to **think and invest in reverse**. When everyone is greedy, you must learn to be fearful; when the market is in panic, you must see the opportunities. This is not merely about going against the tide but is based on a profound understanding of value and a calm observation of market emotions leading to independent judgment. This made me realize that the ultimate competition in investing is not the speed of information acquisition or the sophistication of analytical tools, but the cultivation of character and depth of thought. It requires us to overcome human weaknesses, maintain independence and clarity, and find our rational compass amid the madness and despair of the crowd.
2. Risk: The misunderstood 'devil,' the true core of investing.
The discussion of 'risk' in the book is arguably the most brilliant and also the most transformative part for my understanding. Traditional views often equate risk with volatility, but Max sharply points out that **the essence of risk is 'the possibility of permanent loss,'** which means 'you don't know what you're doing.'
This definition has made me alert. Many times, we chase high-volatility stocks, thinking that is high risk and high return, but we ignore the most fundamental risk — ignorance of the value of the companies we invest in and indifference to the relationship between price and value. True risk control is not about avoiding volatility, but about buying when prices are far below value, establishing sufficient safety margins. It requires us to be 'defensive investors,' with the primary goal of 'not being crushed during market crashes,' and only then pursuing returns. This reverence for risk is the cornerstone that every investor must establish before entering the market.
3. Value: The 'anchor' of the investment world.
No matter how noisy the market is or how prices fluctuate, 'value' remains the unchanging 'anchor' in the investment world. Max repeatedly emphasizes that the cornerstone of investing is the accurate assessment of intrinsic value. This requires us to delve into the fundamentals of companies, understanding their assets, earnings, cash flows, and future prospects.
"Buying well" is more important than "buying good." A great company can be a poor investment if the price is too high; conversely, an average company can yield substantial returns if the price is low enough (i.e., a 'bargain'). This helped me understand the essence of value investing — it is not simply about labeling a company as 'good,' but rather finding opportunities in the deviations between market price and intrinsic value. This requires patience, discipline, and calm judgment independent of market emotions.
4. Cycles: Understanding the rhythm of how the world operates.
"Cycles never end," is another saying of Max. Economy, market, and emotions swing like a pendulum, oscillating between extreme optimism and pessimism. Understanding cycles means understanding the rhythm of how the world operates.
As investors, we cannot predict the precise turning points of cycles, but we can sense their stages. Stay alert during market euphoria when everyone insists 'this time is different'; stay greedy (or have the courage to buy) during market despair when quality assets are being sold cheaply. This does not encourage blind bottom-fishing but requires us to think within the framework of cycles, utilizing the laws of cycles rather than being consumed by them.
Conclusion: Investing is a practice, and life is the same.
Closing the book, what I feel is not only an update of investment philosophy but also an enlightenment of life philosophy. Max's investment thoughts are filled with dialectical thinking and Eastern wisdom: **'Understanding risk' corresponds to 'thinking of danger in times of peace,' 'reverse thinking' contains 'the movement of opposites,' and 'patient waiting' fits with 'maintaining integrity and waiting for the right moment.'**
Investing, at its core, is a practice of self-dialogue and a game with human nature. It requires us to remain humble (acknowledging the unpredictability of the future), patient (waiting for the return of value), independent (not blindly following group judgments), and always to hold a sense of reverence towards the market.
(The most important thing in investing) This book may not directly tell you which stock to buy today, but it can help you establish a framework for thinking about investing and understanding the market, allowing you to navigate your investment journey with less confusion and more composure; less impulsiveness and more rationality. This may be the true reason it is called an 'essential tool for value investors.' For anyone who wishes to go further and steadier on the road of investing, this is a book worth digesting repeatedly and always finding new insights.
