Howard Marks is co-founder of Oaktree Capital Management and author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor (2011). His thoughts, ideas and insights have become fodder for many of our blog posts, as he is very willing to share them. In an interview with John Mihaljevic, CFA and Managing Editor of the newsletter The Manual of Ideas, Marks shares his views on many issues pertinent to the world of investing.

The most dangerous thing to neglect is “risk consciousness.” Marks believes that the best accomplishment in investing is “making a lot of money with less-than-commensurate risk.” The great investors, according to Marks, should be measured over a long time span and demonstrate low levels of loss. Short-term performance, he says, is an “imposter.” The only way to consistently outperform, in his opinion, is by “being mindful of risk and limiting it.”

It is better to invest scared. Another risky approach, says Marks, is “to think you got it figured out or that you can’t make a mistake, or that your estimates are right because they’re yours.” On the other hand, Marks also warns that investing isn’t a business for those with no ego because taking a contrarian view is key. “You have to be strong enough in ego,” he says, “to hold difficult unusual positions and stay with them.”

There is no secret method for any of this stuff. Marks asserts the importance of being aware of the “temperature of the market” as sometimes the investing world is “highly hospitable (when prices are depressed) and sometimes it is very hostile (when prices are elevated).” In his view, it is unrealistic to view stocks in a vacuum and think that a cheap stock is a good buy irrespective of the global climate. “If you don’t follow the pendulum and understand the cycle” he says, “that implies that you always invest money as aggressively. That doesn’t make any sense to me.”

Part II will be posted tomorrow.