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2 July 2026

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Extract from Cuffelinks Newsletter Edition 59

Many of our readers and writers are away at the moment, and Cuffelinks will not be publishing its usual original content this week. However, a couple of articles have come across our desk that deliver insightful Anzac Day reading between two-up throws.

The first is from Howard Marks of Oaktree Capital. He has been writing memos to his clients for 25 years, and the latest asks useful questions for all investors. What do you believe in? What principles lie behind your decisions? Investors should consider:

  • Do efficient markets exist? Is it possible to 'beat the market'?
  • Will you emphasise risk control or return maximisation as the primary route to success?
  • Will you put your faith in macro forecasts and adjust your portfolio accordingly?
  • How do you think about risk? Is it volatility or the probability of permanent loss?
  • How do you view the question of determinism versus randomness or luck?
  • Most importantly, how will you define success, and what risks will you take to achieve it? In trying to be right, are you willing to bear the inescapable risk of being wrong?

That’s a worthwhile list of questions. If we’re going to dare to be great, Marks asserts, we have to dare to be different. And wrong. The April 2014 memo, 'Dare to Be Great II' is linked here.

The second study is the 20th annual Quantitative Analysis of Investor Behavior (QAIB) from Boston-based DALBAR Inc. It claims that while the S&P500 index has risen 9.22% pa over the last 20 years, the average investor has earned only 5.02% pa. DALBAR argues investors are irrational and buy high when markets are strong, and then panic and sell low when markets weaken. Investment returns depend more on investor behaviour than fund performance. They say investor education is failing, because the best advice is to invest more money, hold on to the investments and manage them safely rather than trying to time the market. Focus more on achieving personal financial goals than performance.

While the study has its criticis, it also has valuable lessons, and DALBAR offers a free look at the full report here.

 

  •   24 April 2014
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