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The Most Important Thing IlluminatedUncommon Sense for the Thoughtful Investor$
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Howard Marks

Print publication date: 2013

Print ISBN-13: 9780231162845

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231162845.001.0001

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The Most Important Thing Is … Reasonable Expectations

The Most Important Thing Is … Reasonable Expectations

(p.209) 20 The Most Important Thing Is … Reasonable Expectations
The Most Important Thing Illuminated

Howard Marks

Columbia University Press

This chapter adds another element needed for successful investing: having reasonable expectations. No investment activity is likely to be successful unless the return goal is explicit and reasonable in the absolute and relative to the risk entailed. Every investment effort should begin with a statement of what the investor is trying to accomplish. The key questions are what the return goal is, how much risk the investor can tolerate, and how much liquidity they are likely to require in the interim. One of the most dramatic demonstrations of the importance of reasonable expectations is the scandal involving Bernard Madoff and his Ponzi scheme. Unrealistic expectations also played a key role in creating the recent financial crisis and the ensuing market crash.

Keywords:   reasonable expectations, investment, return, risk, Bernard Madoff, Ponzi scheme, unrealistic expectations, financial crisis, market crash

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