In a recent virtual interview with Bloomberg, Oaktree Capital Management co-chair Howard Marks, CFA, shared six thought processes that have guided his decades-long career in finance.

“Two patterns stand out,” the article notes: “Being different and being right.”

Marks offered the following tips:

1. View market movements constructively. Marks says that investors tend to look at markets through the lens of boom and bust cycles and predict future movements based on the past. But such a conventional view, he says, can create distortions which he likes to avoid. “I tend to think of them, more productively, as excesses and corrections.”
2. Know what you don’t know. Marks underscored the importance of intellectual humility, “of being aware that there are limits to your knowledge,” citing the current financial crisis as an important case in point. “It’s so silly for an investor to build his investment conclusions around his view of what the disease holds when he knows nothing about it,” Marks argues. “You shouldn’t make it up on your own, you should look to the experts.”
3. Insist on a margin of safety. “For any given investment that you consider making,” Marks advises, “evaluate the investment relative to the underlying fundamentals.” To define that margin of safety, Marks recommends that investors consider “the company, the stability of the industry, and the underlying predictability of both as well as the lowness of the price.”
4. Know when to be aggressive. For investors, Marks says, caution is a good strategy when dealing with the unknown, although he admits to becoming aggressive when he and his firm believe they have identified strong investments: “I think that toggling between aggressive and defensive is the greatest single thing than an investor can do, if they can do it appropriately.”
5. Be different but be correct. In order to generate healthy returns, Marks says, you have to separate yourself from the pack while also being right: “If you think and behave different from other people—and you’re more right than they are, that’s a necessary ingredient—then you can have superior performance.” But that’s not easy to do, he says, adding that “knee-jerk contrarianism is certainly not a successful strategy.”
6. Get comfortable with discomfort. “Every great investment begins in discomfort,” Marks asserts. “If everyone else didn’t hate the investments, they wouldn’t be cheap.”

According to Marks, uncertainty and discomfort will be “major components of financial markets” as the globe continues to grapple with the pandemic: “This will play out over the next several quarters, if not years.”