The Memo by Howard Marks Ruminating on Asset Allocation
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Oct 22, 2024 This discussion dives into the evolution of asset allocation strategies, emphasizing the tension between ownership and debt. It explores how to target risk while balancing growth and capital preservation. The podcast highlights the contrasting dynamics between various asset classes, and encourages increasing credit allocation for better returns. Listeners will gain insights into making informed investment decisions amidst market volatility, while acknowledging the risks of relying on past performances.
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Two Asset Classes
- There are only two asset classes: ownership and debt.
- These represent fundamentally different approaches to participating in a business.
Owners vs. Lenders
- Owners take on risk without a guaranteed return, hoping for residual profits after other obligations.
- Lenders provide funds in exchange for promised interest and principal repayment, a fixed outcome.
Risk Posture
- Determine your target risk posture, balancing aggressiveness and defensiveness.
- Prioritize either preserving capital or growing it, as they are mutually exclusive.