New Howard Marks Letter

A new Howard Marks memo is out:

Pretty interesting discussion on volatility, risk, returns, and sitting on one’s hands. My favorite part:

I’ll end my discussion of this subject with a wonderful citation:
A news item that has gotten a lot of attention recently concerned an internal performance
review of Fidelity accounts to determine which type of investors received the best returns
between 2003 and 2013. The customer account audit revealed that the best investors were
either dead or inactive – the people who switched jobs and “forgot” about an old 401(k)
leaving the current options in place, or the people who died and the assets were frozen
while the estate handled the assets. (“Fidelity’s Best Investors Are Dead,” The
Conservative Income Investor, April 8, 2020)

The referenced article is news to me but it makes sense considering what was happening in the world in April 2020. Here is a link to the article: Fidelity’s Best Investors Are Dead | The Conservative Income Investor


Well how cherry picky of them. Yes, you’ll do well when the market goes from a 50% loss low-point back to break-even. That’s a 100% boost. How much were people spending down during that time? Oh, zero. Not spending any money is another way to make your investments look good over any 10 year period.


Sounds about right…
“Lethargy, bordering on sloth, remains the cornerstone of our investing style.” -Warren Buffett


Good lord. Marks says they couldn’t source the Fidelity report and it is “probably apocryphal” (that is, BS). “But I still like the idea, since the conclusion is so much in line with my thinking.”

Is that we consider good argument. Finding a dated newsletter citing a non-existent report with a conclusion which agrees with our thinking?

It’s funny, but I lost some respect for Marks for repeating something he knows is probably not true.


While its true that the Fidelity “Dead Investor” study is just Wall Street folklore,
the fact of the matter is that most active (living) investors achieve subpar results.
According to these 2 studies the average investor couldn’t even match the returns on 3 Month T-Bills over a 20 year period…No doubt a Zombie with a 60/40 index portfolio would have done better…

“The active investors will have their returns diminished by a far greater percentage than will their inactive brethren. That means that the passive group – the “know-nothings” – must win.” - Warren Buffett, 2007 Berkshire Hathaway Shareholder Letter

“Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades.” - Warren Buffett