Book Review: The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor

The author of The Most Important Thing Illuminated is Howard Marks. He is the co-founder and co-chairman of Oaktree Capital Management, an American global alternative investment management firm with expertise in credit strategies. There are five commentators in this book and they are Bruce Greenwald, Christopher Davis, Joel Greenblatt, Paul Johnson and Seth Klarman. The author also adds his own commentary throughout the text.

Layout of The Most Important Thing Illuminated

This book has 21 chapters, a foreword and an introduction. The first four chapters are the basics of value investing.

The next three chapters are about risk management.

The following chapter is about cyclicality in investment.

Chapter nine to 11 discuss the psychology of investing.

The next nine chapters teach about defensive investing.

 The final chapter is the conclusion and summary of the book.


This book does not offer much on financial analysis or investment theory but more on psychology of investing. The author shared his own thought process on investing but acknowledged that his process is not the only way to success.

The main theme of this book is risk. What is risk? It is uncertainty about which outcome will occur and about the possibility of loss when the unfavourable ones do. Two risks in investing are the risk of losing money and the risk of missing opportunity. We can largely eliminate either one, but not both.

To be successful in investing, an accurate estimate of intrinsic value is indispensable. Trying to buy below value is the best chance that we have but it is not infallible. The author reminded us that being correct about something is not the same as being proved correct immediately. How do we achieve superiority in estimating intrinsic value? By learning things others do not, seeing things differently or doing a better job of analysing them – ideally, all three.

Most investors’ results will be determined more by how many losers they have and how bad they are, instead of the greatness of their winners. So, it is very important to limit our losses. We should aim for asymmetry where there is better performance on the upside than on the downside. According to the author, the biggest investing errors come from psychological factors, so it is important to control our emotion and ego.

Value investors are generally contrarians. However, it is not enough to do things that are opposite of what the crowd is doing. We must know why the crowd is wrong. The author said that it is a contrarian job to catch falling knives, hopefully with care and skill. This is due to the fact that it is almost impossible to always be able to buy at the bottom.

What are the hallmarks of best investors according to the author? Investing scared, requiring good value and a substantial margin for error, and being conscious of what you don’t know and can’t control.


Overall, I find The Most Important Thing Illuminated to be a great book about value investing, especially on risk management. Though there are not many techniques discussed in this book, I think the lessons on risk is more important because the techniques and styles should be individualized while risk management principles should be almost universal. As the author said, trying to avoid losses is more important than striving for great investment success.

As usual, before I end, I will share some quotes from this book.

“Good times teach only bad lessons: that investing is easy, that you know its secrets, and that you needn’t worry about risk. The most valuable lessons are learned in tough times.”

“The quest in value investing is for cheapness.”

“And the success of your investment actions shouldn’t be highly dependent on normal outcomes prevailing; instead, you must allow for outliers.”

“Great investing requires both generating returns and controlling risk. And recognizing risk is an absolute prerequisite for controlling it.”

“When there’s nothing particularly clever to do, the potential pitfall lies in insisting on being clever.”

Recommended book

If you are interested in The Most Important Thing Illuminated, you may get the book from Kinokuniya Malaysia through the link below*.

*Disclosure: The above link is Involve Asia affiliate link. Thus, I may earn a small commission when you purchase the book through this link.

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