The Most Important Thing

Review From User :

The version I read is actually titled 'The Most Important Thing Illuminated' but I don't see it here on Goodreads. It is actually a reissue of the earlier book, this time with annotated comments from Christopher Davis, Joel Greenblatt, Paul Johnson and Seth Klarman. Greenblatt and Klarman are contemporary value investing legends familiar to many people. I can't say that the comments really add much to the original text though. If you pay enough attention to what Marks himself says, you could probably do just as well with the original version.

After two decades in the financial industry and having devoured scores of books on investing / trading, I can say with almost absolute certainty that there is no magic "silver bullet" for investment success (at least not of the type that lasts). Which is why this book resonates with me, because Marks offers no fancy formulae for assured astronomical market profits but instead goes back to the basics and underlines the key principles to adhere to for financial longevity. Yes, I say principles (plural) as there is no ONE most important thing revealed as the title suggests, but in fact, 21 of them (lol).

Moving on from this slight transgression for which I totally forgive him, I would say that he has managed to lay out, in a highly accessible manner, a solid foundation for staying in the game and letting the magic of compounding do its work. The main gist of it revolves around avoiding large losses or being wiped out completely (you can't win if you can't play). This is extremely important due to the asymmetrical relationship between gains vs losses (for eg. it will take a 100% gain to recover from a 50% loss). A huge drawdown in any one year can really wreck years of compounded returns. How to avoid this is largely through being constantly aware of where we currently are in the market cycle, adjusting our risk/return tradeoffs accordingly and having the courage and resources (preserved by avoiding large losses) to go against the crowd at extreme ends of the investor psychology pendulum. This necessarily entails never participating when asset prices diverge too much from intrinsic value (unless you plan to go short), no matter how enticing an opportunity might seem (of course, this is when price > value. On the flip side, a wide divergence of value > price would be the time to jump in and buy).

I highly recommend reading this book first if you are thinking of taking your investments into your own hands for the first time. These are everlasting principles from which even seasoned investors/traders would benefit to be reminded of from time to time.


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