Oaktree Capital Management co-founder and co-chair Howard Marks recently attended the University of Pennsylvania Wharton School’s “Howard Marks Investment Series” lecture in 2026, where he dialogued with Christopher Geczy, a professor of finance with an additional appointment at Wharton. They discussed three of Marks’ representative memos—“Fewer Losers, or More Winners?”, “What Really Matters,” and “Taking the Temperature.”
Among other topics, they covered the current market “temperature,” investor psychology, credit market risk, whether value investing is outdated, and whether long-term success comes from “making fewer mistakes” or from “catching the big winners.” The core of the conversation was not predicting whether the market will rise or fall tomorrow, but returning to the investment philosophy Marks has long reiterated: market cycles are inevitable; investor psychology swings between extreme optimism and extreme pessimism; and what truly matters is not buying the asset that looks best, but buying it at a reasonable—indeed, even cheap—price.
Howard Marks: The market mood isn’t as optimistic as before, but it’s not at panic levels
Marks said plainly that the market has indeed shifted slightly away from the prior optimistic mood, but it is still far from despair or panic. Therefore, investors should not mistake the current pullback for a historic low after a comprehensive collapse.
On the market’s “temperature,” Marks said that in the past few years, U.S. equities were clearly driven by optimistic sentiment. He recalled that around October 2022, the market moved from extremely negative to positive. Then in 2023, 2024, and 2025, the S&P 500 Index kept climbing for three consecutive years, with an accumulated gain of about 87%. If you include the fourth quarter of 2022 as well, the gain exceeds 100%. He believes it would be difficult to argue that such a trend wasn’t driven by optimism.
However, Marks also pointed out that recent times have begun to show some negative signals. First, the Trump administration announced early April large-scale tariffs that exceeded market expectations, which caused the market to drop by about 15% at one point. Second, in the credit market there have been bankruptcies such as First Brands and Tricolor, and some cases have even been suspected of involving fraud, leading investors to re-examine whether credit expansion has been too loosely run.
JPMorgan CEO Jamie Dimon once described this kind of credit risk as “if you see one cockroach, there are usually more.” Marks echoed the point: a single event may not be enough to shake the market, but when multiple negative factors form a “confluence,” market psychology can abruptly turn.
Howard Marks on whether AI threatens the software industry; investors’ minds are a bit out of sync
He further noted that around February this year, when OpenAI and Anthropic launched new AI coding models, the market began to question the long-term value of software companies. Since many software companies were previously favored in the M&A market and raised large amounts of debt through the credit markets, once the market starts to worry that AI will disrupt the software industry, investors also begin to fear whether the related debts can be repaid on schedule.
Marks said investor psychology often doesn’t swing between “not bad” and “not good,” but instead violently switches between “perfect” and “no hope.” Software companies are a case in point: the market may think everything is fine one moment, and then decide the entire industry can’t work the next.
Marks linked this to “cognitive dissonance.” He said that during a stretch of optimistic markets, they easily absorb good news and push prices higher, while tending to ignore negative information that conflicts with the existing optimistic stance. Until a certain moment, when bad news accumulates to a critical point, it suddenly overwhelms the original optimistic bias. That is also why markets often seem to change direction without warning: it’s not because any single event is sufficient to change everything, but because investor psychology can finally no longer ignore the negative signals.
Investing isn’t buying at the bottom—it’s whether the asset is cheap
Even so, Marks doesn’t think this is a cheap moment worth launching a full-scale offensive. He said the S&P 500’s P/E ratio was previously about 23, and is now about 22. Although it has fallen slightly from its peak, compared with the historical average of 16 to 17, it still appears high. Optimists might argue, “This time is different,” because the S&P 500 constituents are of better quality now—especially most of the companies among the U.S. “Magnificent Seven,” which may be among the best companies he has ever seen.
But Marks also reminded that in every big bull run, supporters use “this time is different” to justify elevated valuations, and investors must stay alert to that narrative. When asked whether to wait for the market bottom, Marks gave an unambiguous answer: waiting for the bottom is one of the dumbest ideas in investing. He said the bottom, by definition, is the day before the market starts rising. But if that’s the definition, investors can never know at the time that today is the bottom; they can only look back afterward and realize it was.
Therefore, investment should not be based on “Am I buying at the lowest point?” but on “Is the asset already cheap?” He emphasized that investors can judge whether a price is attractive, but they cannot determine whether the market will never fall again.
Howard Marks on whether to enter when the market is most fearful
Marks used Oaktree Capital’s experience during the 2008 financial crisis as an example. At that time, financial institutions such as Lehman Brothers, Bear Stearns, Wachovia, Washington Mutual, and AIG were failing one after another, and the market broadly believed the financial system might collapse. Oaktree had just raised a distressed debt fund with a size of $11 billion. It had about $10 billion in available capital, facing a key question: Should it invest when the market is at its most panicked?
Marks said the judgment he and co-founder Bruce Karsh made was simple then: if the world truly collapses, then what you do that day doesn’t matter. But if the world doesn’t collapse and Oaktree doesn’t invest, then it hasn’t done its job. So they decided to enter. The market continued to fall because others were still selling; Oaktree couldn’t catch all the selling, but they kept buying, getting more as prices went lower.
Marks said that what was truly needed then wasn’t knowing where the bottom was, but two things: first, you must already have investable capital in hand, because it’s difficult to raise money in a crisis; second, you must have the courage to deploy capital. He added that this wasn’t just about courage—numbers themselves provided support as well. At the time, Oaktree bought the highest-ranking part among leveraged buyout company debt. To make the senior creditors lose money, you would need to make the equity value go to zero first—and then ensure that all subordinated debt also couldn’t be repaid.
And by then, Oaktree’s entry price was so low that even if the eventual value of these companies ended up as only one-third, one-quarter, or even one-fifth of the acquisition price, Oaktree still might not lose money. In other words, if a company was previously bought by a private equity firm for $4 billion, Oaktree could buy senior debt at an interest yield as high as 15% to 20%—and even when the company value fell to $1 billion, there was still a margin of safety.
It was precisely support from both psychology and the numbers that allowed Oaktree to invest an average of $450 million per week within a single quarter, and about $7 billion over 15 weeks.
If you had bought the “beautiful 50” and held for five years back then, you might have lost 95%
On value investing versus growth investing, Marks looked back: before the 1960s, most participants in the stock market were generally called investors, with no clear separation into “growth stock investors” or “value stock investors.”
Only in the early 1960s did Wall Street begin promoting the concept of “growth stocks”—companies that look expensive based on today’s assets or profits, but are believed to have a bright future, such as IBM, Xerox, Kodak, Polaroid, Hewlett-Packard, Texas Instruments, Merck, Eli Lilly, Coca-Cola, Sears, and others. These stocks later formed the so-called “Nifty Fifty,” the “beautiful 50” concept, and were sought after by big banks like Citigroup.
But Marks’ early career also taught him a profound lesson in this wave. He said that if investors had bought these beautiful 50 stocks in 1969 and held them for five years based on their conviction, they could have lost about 95%. Two reasons: first, the market overestimated the fundamentals of many of those companies, and many did end up performing worse than expected; second, these stocks were broadly too expensive.
So Marks learned a principle that stayed with him for life: investment success doesn’t come from buying good things—it comes from buying well. It’s not what you buy that matters most; it’s the price you pay.
He stressed that even the best assets can become dangerous if the price is too high; conversely, very few assets are so poor that they can’t be good buys if the price is cheap enough. That is also how he redefined value investing: value investing shouldn’t be rigidly understood as only buying low-growth, low-valuation, traditional-industry companies. Fast-growing companies can also be good value investments—the key is whether investors buy that growth potential at a reasonable price.
Marks mentioned that during the pandemic, his son Andrew and his family lived with him, and the father and son discussed the boundary between growth and value extensively, ultimately leading him to write the memo “Something of Value” in January 2021. His conclusion was that investment shouldn’t be constrained by the binary of “growth” versus “value,” but return to the fundamental question: what is the asset value, and is the price reasonable?
Think before selling: if you don’t hold it today, would you buy it?
For selling discipline, Marks offered another important perspective: selling should be viewed as a decision to “unbuy.” He wrote a memo around 2017 titled “Selling Out,” discussing why investors sell. Half jokingly, he said investors usually have two reasons for selling: selling because it went up—because they fear the rally stops and profits disappear; or selling because it went down—because they fear further declines. But logically, if you sell because of both upswings and downswings, obviously it cannot be a correct investment framework.
Marks believes investors should pretend they don’t currently own the asset and ask again: if I didn’t hold it today, would I buy it? If the answer is no, then perhaps they should consider selling. But he added that it’s not that every asset is strictly buy-or-sell—some assets trade at reasonable price ranges, neither clearly cheap nor clearly expensive. In that case, “holding” itself is a reasonable option.
The real danger is when investors, because their asset has already risen, instinctively want to “sell a little first,” “get their costs back,” or “selling half means you won’t be all wrong.” Marks said he is naturally more conservative, influenced by parents who lived through the Great Depression, and often heard warnings such as “don’t put all your eggs in one basket” and “be prepared for the worst.” So in the past, he also tended to sell too early.
He gave the example of Amazon to show the cost of selling too early. Amazon reached $90 during the tech bubble in 1999; after the bubble burst, it fell to $6 at one point—a drop of up to 93%. If investors were smart enough to buy at $6, when it rose to $12 would they sell just because it doubled? If they held until $60—already up 10x—would they sell then? If it reached $600—up 100x—most people would probably sell half, three-quarters, or even 90%.
But when Marks wrote that memo, Amazon was around $3,300. In other words, even if you sell at $600 and you’ve already earned 100x, you might still leave most of the subsequent profits on the table.
Marks therefore reminds that truly great investment opportunities are extremely rare. Buffett once said that over his 70-year investment career, most of his wealth came from 12 ideas. Charlie Munger said he made most of his money from 4 ideas. If investors understand how rare the true “compounders” are, they’ll realize that getting off too early can be a huge mistake.
Finally, Marks returns to the core of his memo “Fewer Losers, or More Winners?”: does investment success ultimately come from catching more big winners or from avoiding more losers?
He cites Charles Ellis’ “Winning the Loser’s Game,” and a metaphor from Cy Ramo in Extraordinary Tennis for Ordinary Tennis Players. In professional tennis competitions, victory usually goes to the player who can hit the most winners, because if a top player only plays it safe and returns the ball, the opponent can attack quickly. But in amateur tennis, victory often goes to the player who makes fewer mistakes, because typical players can’t consistently hit winners; as long as you can just return more balls over the net, the opponent will naturally make errors.
Marks believes the same idea applies to investing, depending on the asset class. In venture capital, stocks, and even real estate, investors may need to find some big winners to offset failed investments and create excess returns. But in credit investing, things are different. As long as you put out a batch of loans and avoid defaults among them, investors can earn the originally expected returns. That is why credit investing is more suited to a “fewer mistakes” philosophy.
This also explains Oaktree Capital’s first two principles in its investment philosophy at founding: first, risk control; second, consistency. The core is not to aim to make a lot of money on every single trade, but to avoid major losses.
Howard Marks: There is no single answer in investing—learn who you are
However, Marks didn’t package this approach as a unique answer for everyone. He stressed that investors should choose their strategy based on their own capabilities, personality, and goals.
If an amateur player tries to imitate a professional player’s playstyle in hitting winners, the result could be disastrous. But if someone aims to become a champion, they must learn how to hit winners and assume the corresponding risks. Investing is the same: some people are suited to compounding over the long term by controlling risk and avoiding losers; others must learn to identify the very few big winners. What’s truly important is knowing who you are and what you’re good at, and building an investment approach accordingly—not blindly copying others.
Throughout the talk, Howard Marks didn’t provide a simple answer to “Should you buy now or sell now?” But he offered a more important framework: the market isn’t cheap enough to be exciting, and psychology isn’t pessimistic enough to be at a historical extreme. Investors shouldn’t wait for the bottom because the bottom cannot be identified in real time. And they shouldn’t automatically step in just because the market pulls back; instead, they should evaluate whether the price offers a sufficient margin of safety.
For Marks, investing ultimately isn’t about predicting—it’s about maintaining discipline as market sentiment swings. While others go from seeing “perfection” to seeing “despair,” investors must stay calm and calculate price, value, and risk.
This article 《The Most Important Thing in Investing》Howard Marks: Real discipline isn’t waiting for the bottom—it’s knowing what “cheap” means was first published on Chain News ABMedia.
