Thursday, May 1, 2014

Howard Marks quote

When you boil it all down, it’s the investor’s job to intelligently bear risk for profit. Doing it well is what separates the best from the rest. 
… 
While risk control is essential, risk bearing is neither wise nor unwise per se. It’s inevitably part of most investment strategies and investment niches. It can be done well or poorly, and at the right time or the wrong time. If you have enough skill to be able to move into the more aggressive niches with risk under control, it’s the best thing possible. But the potential pitfalls are many, and they must be avoided. 
Careful risk controllers know they don’t know the future. They know it can include some negative outcomes, but not how bad they might be, or exactly what their probabilities are. Thus, the principal pitfalls come in the inability to know “how bad is bad,” and in resulting poor decisions.