by winston » Sat Apr 12, 2014 8:26 pm
According to Marks' latest letter, you can achieve superior results in investing by being a contrarian.
Invest in assets everyone else is ignoring or doesn't have the guts to buy… but only in situations where your potential gains are much larger than your downside risk.
From Marks' letter…
The goal in investing is asymmetry: to expose yourself to return in a way that doesn't expose you commensurately to risk, and to participate in gains when the market rises to a greater extent than you participate in losses when it falls.
But that doesn't mean the avoidance of all losses is a reasonable objective. Take another look at the goal of asymmetry set out above: it talks about achieving a preponderance of gain over loss, not avoiding all chance of loss.
Why should superior profits be available to the novice, the untutored, or the lazy? Why should people be able to make above-average returns without hard work and above-average skill, and without knowing something most others don't know? And yet many individuals invest based on the belief that they can. (If they didn't believe that, wouldn't they index, or, at a minimum, turn over the task to others?)
To repeat… Just holding your nose and buying unpopular assets isn't enough. You must assess the risk of entering the position…
No, the solution can't lie in rigid tactics, publicly available formulas, or loss-eliminating rules… or on complete risk avoidance. Superior investment results can only stem from a better-than-average ability to figure out when risk-taking will lead to gain and when it will end in loss. There is no alternative.
Source: Growth Stock Wire
It's all about "how much you made when you were right" & "how little you lost when you were wrong"