Intellectual Humility is Important in Investing

Howard Marks, Co-Chairman of Oaktree Capital, is a highly successful investor. A recent letter to shareholders penned by Marks contained what I thought is excellent wisdom for investors on the topic of forecasting. His key points are a) economic forecasting is difficult at any time and virtually impossible in the current environment; b) it is essential for investors to have intellectual humility, meaning accepting and understanding the limits of their knowledge, or as Marks put it, “to be able to know what you don’t know”. The inherent uncertainty involved in forecasting to which Marks refers creates investment risk. We aim to mitigate this risk in client portfolios through asset class diversification and strategic portfolio allocation. By adopting these strategies, we can be proactive in making investments we believe will provide capital growth for clients while also protecting against inevitable events and developments (i.e. risks) that we cannot predict or forecast.