Do college graduates looking to get into public markets have the same opportunities now than they did in 1979? That question was posed by CNBC to well-known investor Seth Klarman, who says that while there’s more money in public markets these days, which has made them more efficient, there’s a lean towards the short-term that makes some pricing less efficient.
If a college graduate came to him and asked where they should make their career, Klarman told CNBC that he would “encourage them to look for the most inefficient pockets in the world” as well as to find a mentor. Those looking to find a career in the markets should ask themselves where their strengths and interests lie, and to go “where you are naturally inclined and where you think there may be interesting opportunities.” He added that markets where all-time records are being set might not be the place to look to get started.
For newer investors, Klarman has long been a proponent of index funds; they give exposure to the market at a low cost, and while you won’t outperform the market with an index fund, you won’t underperform it either. However, the key point about returns on long-term investing is that it’s dependent on the entry price. Investors who buy in at a high price might match the index, but the index may not do too well from that point. Also, investors shouldn’t bail out of an index fund during a bad market; they should “stay through thick and thin,” Klarman told CNBC.
When asked about tech stocks and their inflection point, Klarman answered that, with the boundless amounts of information coming at investors all the time, he tries to focus on “things that are actually going to move the needle…in my portfolio.” That means looking at individual situations in stocks, bonds, and real estate transactions rather than trying to predict trends. However, Klarman does look to technology in an effort to not be on the wrong side of a company that might get disrupted, choosing to “focus our time where we think we might spend it productively,” he said in the interview.