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Weekend Edition

Top hedge-fund manager shows how to beat the market
Saturday, April 12, 2014

 One of the world's best investors just explained how to outperform the market and your peers.
 
Howard Marks, chairman of asset-management firm Oaktree Capital, released his latest letter to investors. Oaktree manages around $80 billion. Marks started the fund to invest in distressed debt. He's a born contrarian obsessed with avoiding risk.
 
And he's wary of today's markets, advising investors to "move forward, but with caution." In Marks' view, when investors stop worrying about risk – like in 2007 – look out below. Or, in the oft-quoted words of Warren Buffett, "be fearful when others are greedy, and greedy when others are fearful."
 
 According to Marks' latest letter, you can achieve superior results in investing by being a contrarian. Invest in assets everyone else is ignoring or doesn't have the guts to buy... but only in situations where your potential gains are much larger than your downside risk. From Marks' letter...
 
The goal in investing is asymmetry: to expose yourself to return in a way that doesn't expose you commensurately to risk, and to participate in gains when the market rises to a greater extent than you participate in losses when it falls. But that doesn't mean the avoidance of all losses is a reasonable objective. Take another look at the goal of asymmetry set out above: it talks about achieving a preponderance of gain over loss, not avoiding all chance of loss.
 
Why should superior profits be available to the novice, the untutored, or the lazy? Why should people be able to make above-average returns without hard work and above-average skill, and without knowing something most others don't know? And yet many individuals invest based on the belief that they can. (If they didn't believe that, wouldn't they index, or, at a minimum, turn over the task to others?)

 To repeat... Just holding your nose and buying unpopular assets isn't enough. You must assess the risk of entering the position...
 
No, the solution can't lie in rigid tactics, publicly available formulas, or loss-eliminating rules... or on complete risk avoidance. Superior investment results can only stem from a better-than-average ability to figure out when risk-taking will lead to gain and when it will end in loss. There is no alternative.

 Marks' letters are always a great read. You can see his latest for free right here.
 
 Every week, the mainstream media publishes another article on how much money you should have already saved for retirement...
 
According to JPMorgan Asset Management's recently released 2014 "Guide to Retirement," anyone who is 50 years old and making $100,000 a year should have saved $390,000.
 
By the time you hit 65, JPMorgan says you should have $890,000...
 
 But the truth is, there are 16,000 Baby Boomers reaching retirement age every day who don't have anywhere near that kind of cash in their retirement accounts.
 
A new study by the nonprofit research group Employee Benefit Research Institute shows that one in three workers has less than $1,000 in savings. Sixty percent report they or their spouse have less than $25,000 when they reach retirement.
 
And according to Wells Fargo, right now, many people are more worried about paying day-to-day bills than planning for retirement. We want to make sure you're not one of those people...
 
 Cash-strapped folks nearing retirement age think the way to close the gap is by throwing Hail Marys – like buying "hot" growth stocks in hopes of huge gains. But it rarely works. The path to wealth, at any age, is much more deliberate.
 
 Porter's mentor and friend of S&A Mark Ford noticed these disturbing habits from surveying readers at the Palm Beach Letter.
 
Mark has started and owned dozens of businesses. He has written more than a dozen books, some of which became New York Times bestsellers. He has invested in stocks, bonds, and real estate. This week, he told DailyWealth readers that he generated $6 million in passive income in the past year from these investments. (You can read that essay here.)
 
Mark's study showed many Palm Beach Letter subscribers weren't wealthy – at least, not as wealthy as they wanted to be – and the subprime crisis had devastated many of his subscribers.
 
But you're not earning anything in your bank account today... Bond yields are at record lows. Folks are forced to take on more risk, fueling the stock market to new all-time highs.
 
 Mark's goal for the Palm Beach Letter is simple: To give subscribers all the tools they need to become financially independent. According to Mark...
 
In my Creating Wealth essays, as you know, I write about the lessons I've learned and the insights I've gained during the 30-odd years I spent accumulating wealth.
 
I hold nothing back in these essays. I tell you everything I know. I have been writing about business and wealth development for about 13 years now. I've written 14 books, including several best sellers, and more than 3,000 essays.
 
I've also created or co-created more than a dozen specific programs for acquiring wealth.

 Mark shows his subscribers how to build multiple income streams... "There is no faster or surer way to become wealthy than by creating extra income and allocating it toward one's investments," he says.
 
Mark explains his methods for owning rental real estate, which has contributed a large portion of his wealth. But it's not just about starting businesses... Mark also explains how you can "retire next year"... He tells you about some of the most beautiful and inexpensive places in the world where you can retire (with a gorgeous home on the water, a driver, and a private chef). He also shows you, step by step, how to build a million-dollar business from the ground up... starting with just $25,000.
 
 These are just some of the ideas Mark and his team cover in the Palm Beach Letter. And they're still creating more content to help readers become financially independent.
 
If you're interested in learning Mark's methods for building great wealth... Click here to learn more about the Palm Beach Letter.
 
Regards,
 
Sean Goldsmith
 




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