The silver investing bullet - doesn't exist

"When a market, an individual or an investment technique produces impressive returns for a while, it generally attracts excessive (and unquestioning) devotion. I call this solution du jour the 'silver bullet'.

Investors are always looking for it. Cal it the holy grail or the free lunch, but everyone wants a ticket to riches without risk. Few people question whether it can exist or why it should be available to them. At the bottom line, hope springs eternal.

But the silver bullet doesn't exist. No strategy can produce high rates of return without risk. And nobody has all the answers; we're all just human. Markets are highly dynamic. and, among other things, they function over time to take away the opportunity for unusual profits. Unskeptical belief that the silver bullet is at hand eventually leads to capital punishment."

-- Howard Marks, 5-31-2002

Suspension of disbelief - not that great for investing

"In fictions, willing suspension of disbelief adds to our enjoyment. When we watch Peter Pan, we don't want to hear the person sitting next to us say, 'I can see the wires' (even though we know they're there). While we know boys can't fly, we don't care; we're just there for the fun.

But our purpose in investing is serious, not fun, and we must constantly be on the lookout for things that can't work in real life. In short, the process of investing requires a strong dose of disbelief ....Inadequate skepticism contributes to investment losses. Time and time again, the postmortems of financial debacles include two classic  phrases: 'It was too good to be true' and 'What were they thinking?'"

-- Howard Marks, 10-17-2005