The best lessons are about learning what not to do. Great investors like Buffett and Klarman and others drill home the point of avoiding big mistakes. They understand how a loss can be compounded by a mental or emotional misstep, making recovery that much harder.

Like a lot of us, the great investors start out learning this first-hand. Painful experience — from time in the market — can be a great teacher. Mistakes are part of the process.

But they quickly realize there are more efficient, less painful ways of learning from other’s mistakes. As Howard Marks says, you just have to pay attention:

The markets are a classroom where lessons are taught every day. The keys to investment success lie in observing and learning.

The great thing about hindsight is, it always points out what everyone did wrong. Continue Reading…

Charlie Ellis once gave a speech in which he related the three ways to beat the market. You can be smarter than everyone else, you can outwork everyone else, or you can behave better than everyone else.

It turns out none of those are easy.

A lot of investors try to outwork the next person without realizing that all the other next persons are trying to do the same thing.

And the trouble with being smarter than everyone else is that nobody looks or feels smarter until after the fact. The smartest investors tend to do things that nobody else is doing and often seem wrong at the time. Continue Reading…