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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: 20 September 2021

The Most Important Thing Is … Contrarianism

The Most Important Thing Is … Contrarianism

(p.91) 11 The Most Important Thing Is … Contrarianism
The Most Important Thing

Howard Marks

Columbia University Press

This chapter examines another crucial factor for successful investing: contrarianism. Most investors follow trends. Superior investors are the exact opposite. Superior investing requires second-level thinking—a way of thinking that is different from that of others, more complex and more insightful. The judgments of the crowd cannot hold the key to success. Rather, the trend, the consensus view, is something to game against, and the consensus portfolio is one to diverge from. As the pendulum swings or the market goes through its cycles, the key to ultimate success lies in doing the opposite. This is the core of Warren Buffett's oft-quoted advice: “The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.” He is urging us to do the opposite of what others do: to be contrarians. The ultimately most profitable investment actions are by definition contrarian: the investor buys when everyone else sells (and the price is thus low) or they are selling when everyone else is buying (and the price is high).

Keywords:   contrarianism, investors, second-level thinking, Warren Buffett, investment

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