저자: 미상 · 외국인
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하워드 막스의 'The Most Important Thing'을 요약. 2단계 사고(남들과 다르게, 정확하게 생각하기), 시장 비효율성과 가치평가의 중요성, 시장 사이클 이해, 수익보다 위험(리스크) 관리 강조, 안전마진 확보, 운과 감정 통제 등을 다룸. 개별 종목이나 시장 방향에 대한 예측 발언은 없음.
다듬은 글
Hello friends, welcome to Book Pillow on YouTube. In today's video, we'll summarize a wonderful book that will be incredibly useful in your stock market journey. The book's name is "The Most Important Thing," written by Howard Marks. Howard Marks is an American investor and co-founder of Oak Tree Capital Management, an asset management company.
Asset management companies manage people's money, investing it in stocks, bonds, or debt, and charging a commission. According to the latest data from September 2024, Oak Tree Capital Management manages $193 billion. A $1 billion dollar is approximately 88,500 crore rupees. If this company is managing $193 billion, how much would that value be in Indian rupees?
Please let us know in the comments. Talking about the book, "The Most Important Thing" is a very interesting book and teaches you how to develop the qualities you need to become a successful investor. It explains some qualities, such as how to manage risk; how to develop contrarian thinking; why it's important to find the intrinsic value of shares; why the Efficient Market Theory is wrong; and you'll find answers to many such important questions in great detail in this video.
So, without wasting time, let's begin the summary. The first concept I learned from this book is second-level thinking. Author Howard Marks says that if you want to earn better-than-average returns on your investments, you need to develop the habit of second-level thinking. This second-level thinking is extremely difficult because it involves thinking differently from the thinking patterns of average people.
First, let's understand first-level thinking. Suppose someone recommends a company to you, saying, "Brother, invest all your money in this company blindly." People who practice first-level thinking often think that many people consider this company to be good, so let's invest our money in it. The rest will follow.
We'll see what the difference is. Second-level thinkers often wonder whether, based on the current market conditions and the price at which these shares are currently being sold, this company will generate returns in the future. Because everyone in the market is praising this company, it could be that this stock is overrated or overpriced.
It's best to sell these shares and enjoy the profits. When the stock's valuation declines in the future, or when I see a 5x or 10x opportunity in this company, I will invest. This is an example of second-level thinking. The author explains very well in this book that first- level thinkers have a very simple way of thinking and ignore thousands of factors before making their decisions.
However, second-level thinkers have a very research-based thinking approach. Many complex factors are also considered, so if you want to earn above average returns from the stock market, that is, here average returns means if you want to earn more than the returns of Nifty and Sensex, then it is impossible to achieve this with first level thinking because right now a bull run is going on in India, so it does not matter whether your thinking is first level or second level, but in the long run, that is, in five years, 10 years, 20 years from today, if you want to earn crores of rupees from stocks, then second level thinking is very important, which is explained in this book, so this was the first learning that I have learned from this book, now let's come to the second concept which is Understanding Market Efficiency and its Limitations, there is a theory in the stock market which is called The Efficient Market Hypothesis, it means in very easy language that the price of every stock is fairly valued, that is, on 27th September 2024, if a share of reliance.in Industries has a lot of information regarding which the market has It has been priced efficiently, i.e.
correctly. However, author Howard Marks believes that the market is often priced efficiently but not always correctly. This means that there is always opportunity for serious investors if they can prove the market wrong. However, tell me in the comments section whether you think a first- level thinker can go against the market.
My personal opinion is that this is quite difficult for them because to detect market inefficiency, your market psychology must be very strong and you must know exactly whether the price of any stock is overpriced or underpriced due to fear or greed. For example, I remember the example of Y Bank. In 2018, its share price was around 400, and today in 2024, its share price is -2.
So, according to efficient market theory, Y Bank's shares, which were priced at 00 in 2018, were also fairly valued, and today The 2024 Y Ba stock of ₹ is also fairly valued, but for advanced investors, even ₹ may be overvalued, meaning it is a very expensive stock for them, or it is an opportunity for long-term recovery or turnaround.
So, the bottom line is that second-level investors look for these inefficiencies and use them to their advantage. So, basically, the market is you and me. The market is not an alien. Just like humans have limitations, the market also has many limitations. Once you understand this, you will be able to make better investments and earn good returns in the long run.
So, this was the second lesson I learned from this book. Now let's come to the third concept or the third learning I learned from this book, which is the importance of value. Howard Marks says that even the shares of a very good company can cause you losses, and the shares of a very bad company can also cause you losses.
Shares can earn you crores of rupees. The most important factor here is valuation. Let's understand this with an example. Raju invested ₹1 lakh in two excellent companies whose products he uses daily. The fundamentals are excellent, and the company currently faces no problems. The point is that Raju is not a lazy investor.
Many people flocked to these two companies, causing their prices to reach all-time highs. Then Raju invested. Shyam did the same. He bought three or four packs of Desi stocks. In his morning hangover, he looked at which stocks were selling at their 52-week lows this year. He invested in two or four of those companies.
Now, Raju's portfolio has grown by just 5% in the last three years. Shyam won the race because two companies in his portfolio turned out to be multibaggers, meaning they gave 10x returns. Raju had done a lot of research on the companies. Shyam had simply arranged for soda and chocolate, but Shyam benefited significantly because he invested in stocks at the right valuation, albeit on a whim.
This is why he profited the most. Howard Marks says that to be a successful investor, you should avoid popular stocks and invest in companies that offer the opportunity to deliver maximum returns. However, this does n't mean you should invest in penny stocks. He says that the company should be excellent, its products and services should also be excellent.
Valuation should be a key consideration, as a company may be at an all-time high but still be undervalued relative to its potential. As a successful investor, you must calculate valuation, which is not easy at all and is often considered the most boring part of investing. The problem with valuation is that no one is perfect because everyone uses their own method and may favor their own biases.
One person may prioritize sales and profit, while another may focus more on free cash flow. This is very challenging for all of us. To master this skill, you'll need to navigate market cycles, which we'll learn in the next lesson. Now, let's move on to the fourth concept I learned from this book: market cycles.
Howard Marks believes that the stock market and a country's economy operate in cycles. As you can see in this graph, the economy works like this: when the economy slows down, meaning inflation is rising, businesses aren't growing, or foreign investors aren't investing. Due to various other political or economic factors, the economy slows down, and the stock market also experiences a slowdown.
Similarly, when things start to improve, the market recovers and reaches its peak. Investors should be aware of and understand these cycles. This market is highly cyclical in nature, meaning it's sometimes up, sometimes down, and sometimes flat. This also gives real investors the opportunity to follow a contrarian investing approach.
Contrarian means going against the market. If the market is overly optimistic, meaning people are assuming it's bound to rise from here, then you need to be cautious. However, when the market is fearful, you need to be positive and take advantage of buying opportunities. Howard Marks says in this book that it's impossible for anyone to time the market, meaning to know which direction the market is going to move.
However, as an investor, you should at least know your current position in the economic cycle. Based on that, we should decide whether to invest aggressively or save our money and be defensive. So, please let me know in the comments section where you think the Indian stock market is currently positioned.
Please share your opinion. I read all your comments. Now, let's come to the last lesson I learned from this book: focusing on risk, not returns. Most people who enter the stock market have the primary goal of growing their money. For example, if you've invested ₹1 lakh, you expect this ₹1 lakh to become ₹1 lakh after some time.
Especially, those who entered the market after COVID-19 focus heavily on returns. I learned in this book that we should focus more on the risk of capital loss than on returns. If you're investing in a company's stock, consider risk-adjusted returns first. Suppose you've invested ₹1 lakh, the safest investment in India is a fixed deposit, which offers fixed returns.
The annual return is fixed, meaning no matter how the market performs, you'll receive 6% annually on your fixed deposit. The one which is 6 is your risk free rate. So the simple logic is that an investor should get higher returns than at least a fixed deposit because there he is getting risk free returns.
So let us assume that Raju has invested ₹1 lakh in a stock and he has got a return of 15% from there and as we discussed that the risk free rate is 6%, so the real return that Raju has earned is 9% but the stock in which he had invested was quite volatile in nature, that is, it was a very risky stock.
So here we assume that the volatility was 20%. So there is a concept that is Sharpey ratio. So the Sharpey ratio of Raju is 0.45. Similarly, Shyam has also invested ₹1 lakh in a stock from where his return is 15%. You know the risk free rate is %. So the real return that Shyam has earned is also It is at 9 but when it comes to the wallet, that is, the wallet of the stock in which he had invested was very low, that is, it was a very stable company, so here we assume that the wallet was 10, so Shyam's Sharpe ratio is 0.9, so basically the summary is that Shyam has earned the same returns by taking less risk, whereas Raju has earned the same returns by taking more risk like Shyam, so Howard Marks says that it is not necessary that high risk means high rewards and this is the biggest mistake that investors make, as an investor you should pay attention to many risks like market risk, credit risk, liquidity risk, business risk, valuation risk, a very good advice has been given in this book, the author says that think about the downside first, that is, before investing in any stock, see how low that stock can go and always look at the margin of safety, that is, if the real value of a stock If it is selling for ₹1,000,000, then this share is overvalued, meaning you won't get a margin of safety here.
However, if its share price falls to ₹80, you will get a margin of safety of ₹20. So, from today itself, you should inculcate this mindset: I have to give more importance to risk than to returns. Because the basic rule is that no matter what happens, your investment capital should not be lost. So now, let's come to some actionable advice for you from this book, which you should do from today itself.
Number one, know what you don't know. First of all, you should accept that on a human level, a person cannot know everything. Train yourself from saying, "I don't know everything about the stock market." Number two, be different but be correct. As explained in this book, if you want to earn returns higher than the market return, you will have to engage in second-level thinking, which means thinking differently from the thinking patterns of the majority of people.
This means investing in such companies. Invest in companies that are n't popular, perhaps undervalued, or companies that everyone ignores. Sometimes, you can also practice special-situation investing. That is, you save the cash you have for stock market opportunities, and when you get an opportunity, you take full advantage of it.
This isn't easy, but with time and experience, you can develop second-level thinking. The third actionable advice is to use a margin of safety, meaning don't invest in overpriced shares of overvalued companies. Number four: Increase your knowledge of business cycles. Number five: Understand risk and read about risk management.
Number six: Read about investor psychology, because your psychology matters a lot. How much money you're going to make from the stock market in the long term. Number seven, and the last, which is the most important, the author mentions is the role of luck. He says that no matter how much you invest, you can still make a profit.
No matter how much research you do or how hard you work, luck is crucial to achieving success. You may have noticed in real life that many people don't work that hard, but because of luck, or because they were in the right place at the right time, they achieve quick success. The author also suggests that you can strategize to ensure luck favors you.
Number one, gain a lot of knowledge in any one sector. Work so hard that you know the ins and outs of that sector and have deep knowledge about all the companies in that sector. Number two, control your emotions. Number three, do n't be afraid to go against the market. If you do these three things, luck will definitely favor you.
This was a detailed summary of "The Most Important Thing: Uncommon Sense for the Thoughtful Investor," authored by Howard Marks. Please let me know in the comments, as I read all your comments and share as much as possible. I also reply to them, if I am not able to reply then I give a heart to it. What is the most important lesson you got from this book, do tell me in the comments.
If you have more time then you can watch this video of mine, then I will meet you in the next video, till then keep reading keep growing.
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