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The Most Important ThingUncommon Sense for the Thoughtful Investor$
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Howard Marks

Print publication date: 2011

Print ISBN-13: 9780231153683

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231153683.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 18 September 2021

The Most Important Thing Is … Controlling Risk

The Most Important Thing Is … Controlling Risk

(p.57) 7 The Most Important Thing Is … Controlling Risk
The Most Important Thing

Howard Marks

Columbia University Press

This chapter examines an ingredient for successful investing: controlling risk. Great investors are those who take risks that are less than commensurate with the returns they earn. They may produce moderate returns with low risk, or high returns with moderate risk. But achieving high returns with high risk means very little—unless the investor can do it for many years, in which case that perceived “high risk” either wasn't really high or was exceptionally well managed. In order for a portfolio to make it through tough times, the risk generally has to be well controlled. If the portfolio thrives in good times, however, we can't tell whether risk control was present but not required or lacking. Risk control is not the same as risk avoidance. Risk control is the best route to loss avoidance whereas risk avoidance is likely to lead to return avoidance as well. This chapter argues that the road to long-term investment success runs through risk control more than through aggressiveness.

Keywords:   risk, investors, return, portfolio, risk control, risk avoidance, investment

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