NEW DELHI: American investor and author Howard Marks made his mark as a value investor. At the age of 70, the Co-Founder of Oaktree Capital Management has a net worth of $1.95 billion, according to latest Forbes estimates.
He is known for his insightful assessments of market opportunities and risk.
In an interview with ET NOW, Marks shared his views on India and on his approach towards creating value for shareholders:
Move forward, but with caution: The approach is to remain realistic while investing in equities. There is no reward for being optimistic. On the contrary, there is something for being too pessimistic about a certain market condition.
For last five-and-a-half years, Oaktree has been working with a mantra ‘move forward but with caution’, because five-and-a-half years ago, it concluded that uncertainty was high, prospective returns were modest and asset prices were full, Marks said.
Moving forward with caution does not mean one stops investing. “It merely means that we are investing, and we are fully invested but everything we are buying is selected with caution and we consider ourselves a cautious firm,” explained Marks.
“This methodology has helped us a lot and has put us in a very good place for the last five and a half years. We are protected from risk because of our caution approach and we are able to participate when the markets do surprise – this is attributable to the mantra,” he said.
Also read: Howard Marks bullish on India, says be unemotional
Being a long-term investor helps: If you want your wealth to grow, you have to give it time and be patient. Investors should do their own analysis to assess the risk-reward equation for their investment in a company or a sector.
“We have an edge in this environment by being a long-term investor,” Marks said. “When I started almost 50 years ago, we used to think about owning things for five, six, seven years, but now everybody is concerned with quarterly performance,” he said.
“If you can be a long term holder and buy things merely because they are cheap and have a good prospect and then if they get cheaper by more and hold on eventually prove correct. That is how you can do very well that can be a great advantage,” he said.
You need to take more risk to make more money – wrong approach: Marks said the market is largely driven by macro forces and, essentially, the same forces which impact most of the asset classes over these years. But, the world is uncertain and people should be cautious.
“When people look at the famous chart which suggests riskier assets produced higher returns and the way to make more money is to take more risk — I think that is a trap,” he cautioned.
“Merely taking on increased risk for the purpose of gaining a higher return works for a while and then it does not. I think, in my opinion, the world is too uncertain and asset prices are too high to use a pro-risk strategy. That is the caution that I would express today,” he said.
Invest in market without any emotion: There is a tremendous advantage to being unemotional when it comes to investing, said Marks. He said markets are driven by emotions which direct us in doing the wrong thing at the wrong time.
For example, when things go well people get excited and they want to buy more at higher prices and when things go poorly they want to sell at depressed prices. But, the logic is actually opposite.
“All the great investors I know and all the ones you know are basically unemotional, they are analytical, patient and confident. I think that unemotionality is probably the greatest advantage one can have as long as one also has the analytical ability to make good decisions,” he said.
Integrity and high standards: The most important quality which everyone should imbibe according to Marks is being true to yourself and others. “You can be successful in the business world with integrity and high standards and fair treatment of all constituencies,” he said.
“Good or great never terrible is a fabulous set of attributes and if you can do that for 20 years, 30 years, 40 years it is a point of great satisfaction,” he said.