In the updated version of The Most Important Thing, Howard Marks, Seth Klarman, Joel Greenblatt, and others have their comments interspersed throughout the already great text.
The added comments are instructive. Marks takes a unique approach by breaking down his comments into four themes that run throughout the book — the riskiest things being one.
Most of his riskiest things revolve around behavior and ignoring imbalances in the market (there is some overlap too). The point: If you can recognize and avoid the riskiest things in investing, you’ll save yourself from a lot of pain and misery.
1. Paying for Perfection
The biggest losers — be they Nifty-Fifty stocks in 1969, internet stocks in 1999, or mortgage vehicles in 2006 — had something in common; no one could find a flaw. There are lots of ways to describe this condition: “priced for perfection,” “on the pedestal of popularity,” and “nothing can go wrong.” Nothing’s perfect, however, and everything eventually turns out to have flaws. When you pay for perfection, you don’t get what you expected, and the high price you pay exposes you to risk of loss when reality comes to light. This is truly one of the riskiest things.