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welcome investors today we're diving into a fascinating letter from Howard Marx co-founder of oak tree Capital Management with almost 200 billion under management whether you are an active or a passive investor this letter offers invaluable insights into the role of Riskin investing I highly recommend reading this letter on your own because of Mark's original and inspirational writing style he had has no less wisdom than Warren Buffett but less popularity perhaps for marketing reasons only but I'm still here if you don't have the time to read it yourself and his funds beats the S&P 500 which is a huge indicator for me and must be for you also this is an investor worth listening to and I'm as a portfolio maner who beats S&P 500 also find these letters from managers very Val for good investing results here they are so I've made this channel for you to capitalize top worldclass investors thoughts from their rare speeches and letters Marx known for his wisdom and impressive track record uses analogies from chess Sports and back gam to illustrate key investment principles let's explore why understanding risk is crucial for for every investor he gives another optic to absorve the risk in time when so many say about avoiding risks only so the power of sacrifice marks Begins by discussing an article about Chess and sacrifice in chess players sometimes give up pieces to gain an advantage this concept applies directly to investing he describes two types of sacrifices sham sacrifices which are like like by 10year treasury note where you give up liquidity for a guaranteed return and real sacrifices where most Investments involved giving up something for potential gains that aren't immediate or certain the key takeway here is that successfulness and often require sacrifice and certainty for the possibility of higher returns chess grandmas Maris Ashley goes on to speak of sacrifice in Risk turn returns that are familiar to investors he describes his mother's decisions to leave him at age two and his two siblings in Jamaica and traveled to the United States in search for of a better life for herself and for them she reached her goal a decade later and was able to bring her kids to the United States where they would find success in a variety of fields it did not have to turn out that way he it did because she was willing to stomach the key aspect of making real sacrifices the willingness to take risks for a chess player risk is as much inted at as it is calculated due to the inherent complexity of the game it is virt virtually impossible to assess with certainty whether a risky move will pay off in the end it's up to the player to decide if sufficient conditions have been met to take the chance on risky move as is obvious from the article's title the peace is mostly about the role of sacrifice Ashley says many positions cannot be won or saved without something of value being given away from a lowly Pawn all the way up to the mightly queen and the risk return trade off in his letter marks highlights free investment approaches the first is to avoiding risk for little to no return the second involves taking modest risk for modest Returns the third approach has sets High uncertainty for potentially substantial gains Marx emphasizes that high returns usually require meaningful risk he quotes chess champion Magnus Carlson who says not being willing to take risks is an extremely risk strategy it's like refusing to eat your vegetables you might avoid the taste you don't like but you'll miss out on all the good stuff the risk of not taking risks marks warns us about the dangers of being too risk adverse for individual investors this might mean not earning enough to support their lifestyle professional investors on the other hand May underperform benchmarks and disappoint clients he uses be gamon as an allow analogy pointing out that beginners often play too safely rarely winning as a result the lesson here is clear sometimes not taking risks can be the riskiest move of all and lessons from Sports to drive his point home marks quotes two famous athletes Wayne Gretzky once said you miss 100% of the shots you don't take similarly keny SM stated you have to give yourself a chance to fail these quotes reinforce the idea that success often requires embracing the possibility of failure in investing as in sport you can't win if you're not willing to take a shot in the Paradox of rest taking Marx explains that high returns over time don't come from consistent success instead they result from a combination of Mer many decent investment a few Big Winners held for long periods and relatively few big closers he stresses that investors shouldn't expect all winners and no losers success comes from making many Investments knowing some will fall will fail it's like dating you might have to kiss a few frogs before finding your prince or princess and balancing risk and skill in his conclusion marks offers key points on risk taking he reminds us not to expect returns without risk but also warrants that taking risk doesn't guarantee Returns the key is to sacrifice certainty but do it skillfully and intelligently while keeping emotions under control it's delicate balance but one that's crucial for investment success conclusion hover Mark's letter reminds us that risk is an essential part of investing whether you're picking individual stocks or choosing index funds understanding the role of risk can help you make better decisions remember to embrace calculated risk don't few occasional loses and focus on long-term success rather than short-term Perfection by internalizing these lessons you can approach investing with a more balanced and potentially rewarding perspective in the end I will provide best conclusion from original text the bottom line on the Quest for Superior investment returns is clear you should not expect to make money without bearing risk but you shouldn't expect to make money just for taking risk you have to sacrifice certainty but it has to be done skillfully and intelligently and with emotion under control thanks you for watching and don't forget to like And subscribe for more investment insights from a new headphones letters and top mind Top Class investors thank you see you in the next videos
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