How Howard Marks Keeps Beating the Market (And How You Can Too)

Inside the mind of Howard Marks and his memos, philosophy, and the timeless strategies that drive decades of outperformance.

To all the Fluenteers and the Fluent Few, welcome back! 👋

Howard Marks isn’t just another investor, he’s one of the rare few who’s consistently beaten the market for decades. The secret? A philosophy that’s as timeless as it is practical.

In this article, I’ll break down Mark’s core principles, the exact mindset, strategies, and frameworks that separate him from the crowd under 10 minutes, so you can start right after reading this.

By the end, you’ll have the tools to think and invest with the same clarity that drives his outperformance.

So, open your mind, take notes, and let’s learn from one of the greatest.

With that said, happy compounding! 😀

Who Is Howard Marks?

Howard Marks

Warren Buffett doesn’t hand out praise lightly. Yet he’s said: “When I see memos from Howard Marks in my mail, they’re the first thing I open and read.”

Marks, the co-founder of Oaktree Capital Management, has built a $200+ billion empire by thriving where most investors fear to tread, distressed debt, high yield bonds, and credit markets in turmoil. But his true influence comes from his investment memos: part philosophy, part market autopsy, part playbook. Investors around the globe pore over them, searching for clues to how Marks keeps doing what so few can, compounding capital at scale while consistently outmaneuvering the benchmarks.

So, how does he keep beating the indexes? The answer lies not in predicting the next move, but in playing a very different game.

Playing the Opposite Game

Indexes follow popularity. If Apple’s market cap swells, you own more of it by default. No questions asked.

Marks refuses to play that game. Instead, he asks: What’s mispriced? He explains it this way: “In investing, the best opportunities come when consensus underestimates reality.”

Take his August 2025 memo, The Calculus of Value. The S&P 500 was trading at 23x forward earnings, well above historical norms. Optimists saw momentum; Marks saw risk. He reminded readers that when valuations looked this stretched in past cycles (think 1987, 2000, 2014), the following decade delivered meager returns, sometimes even negative. He didn’t predict an imminent crash, but he cautioned: when prices leave no margin for error, you’re no longer investing, you’re hoping.

That distinction, between what’s admired and what’s worth the price, is where Marks pulls away from the pack.

The Art of Risk Control

“You can’t predict. You can prepare.”

This single line could summarize Marks’s entire career.

Indexes take every hit the market delivers. Marks plays defense first, offense second. In his words: “If we avoid the losers, the winners will take care of themselves.”

Consider credit markets. In his Gimme Credit memo (March 2025), Marks highlighted that high-yield bonds, after delivering ~13.5% in 2023 and ~8.2% in 2024, were still offering stock-like returns with far less downside. Spreads had narrowed, yes, but contractual coupon payments and historical recovery rates kept the odds favorable.

The lesson? Risk control doesn’t mean avoiding risk altogether. It means structuring exposure so bad outcomes won’t wreck you. That’s how Oaktree raised $10+ billion in 2008 to buy debt everyone else was dumping, later compounding at nearly 20% annually.

Reading the Market’s Mood

Marks argues the biggest mistakes come not from weak analysis but from psychology. “The pendulum of investor psychology swings from optimism to pessimism, and few people manage to resist it,” he warns.

Right now, he sees that pendulum creeping toward danger. In August 2025, he told Bloomberg that U.S. equities showed signs of the “early days of a bubble.” The evidence? Concentration risk: the “Magnificent Seven” stocks have driven much of the S&P’s gains, creating fragility. And credit spreads have compressed so far that investors seem to believe risk has disappeared.

This doesn’t mean panic tomorrow. It means, as Marks would put it, the odds are shifting. And when odds tilt away from you, playing defense is not cowardice, it’s prudence.

Think Beyond Equities, A Wider Map

Oaktree’s edge is not just psychology. It’s a bigger toolkit.

Marks often reminds readers that “the investment world is not limited to just stocks and bonds, it’s far broader, if you’re willing to look.” While index investors debate overvalued tech stocks, he’s been quietly building exposure to credit markets offering steady, equity-like returns.

Why? Because debt offers clarity. With bonds, you know your coupon, you know your maturity, and you know the recovery history in downturns. With equities, you’re betting on an uncertain stream of future earnings, earnings that may not materialize if growth falters.

In 2025, while the equity market stretched higher, Marks argued credit was a better risk-adjusted bet. For investors, that’s not a call to abandon stocks, but a reminder that opportunity often lies where fewer people are looking.

Patience as a Weapon

Patience is perhaps the rarest skill in investing.

“It’s not what you buy, it’s when you buy it,” Marks insists. That often means doing nothing, sometimes for years. Oaktree doesn’t force capital into bad odds. It waits.

And waiting pays. In 2022, when yields spiked and fear dominated credit markets, Oaktree stepped in aggressively. Investors who had the patience to wait for that setup, and the courage to act when it came, were rewarded with double-digit returns in 2023 and 2024.

Patience is uncomfortable. Index investors ride every wave, good or bad. Marks only surfs when the tide is right.

Why Marks Outpaces Indexes

When you zoom out, the reasons become clear:

• He challenges consensus instead of following it.

• He defines success not by upside but by avoiding permanent loss.

• He reads psychology and cycles as closely as balance sheets.

• He draws from a wider playbook than just equities.

• And he has the discipline to wait until the odds are in his favor.

As he once wrote: “Superior investing consists of buying when the price is below value and selling when it’s above. Everything else is just commentary.”

Indexes can’t think this way. Marks can, and does.

The Takeaway For You

You don’t need Oaktree’s billions to apply Marks’s lessons. But you do need his discipline.

• Ask not only whether a company is great, but whether its greatness is already priced in.

• Protect against downside first. The winners will take care of themselves.

• Track sentiment. When everyone feels safe, danger is near.

• Look beyond the obvious asset classes. Sometimes, credit pays more than equities.

• And above all: wait for the fat pitches. Then swing hard.

Or, as Marks likes to remind us: “There are old investors, and there are bold investors, but there are no old bold investors.”

What do you like the most about Howard Marks’ investment philosophy? 👇🏻

Final Thought

Howard Marks doesn’t beat the indexes because he’s clairvoyant. He beats them because he’s disciplined. He prepares for what can go wrong, resists the herd, and waits until risk and reward fall in his favor.

For investors, the lesson is sobering but empowering: you won’t win by copying the index. You win by thinking differently, controlling risk ruthlessly, and having the patience to wait for your moment. That’s Mark’s way, and it’s how you turn cycles into compounding.

That’s it… for now!

And remember…

Great investments don’t shout. They compound quietly.

— Yorrin (FluentInQuality)

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