Words of Wisdom by Charlie Munger
INVESTOPAPER
Charlie Munger, renowned for his investment acumen and association with Warren Buffett, significantly contributed to the expansion of Berkshire Hathaway into a vast and diversified holding company. Besides his role as an independent director at Costco Wholesale Corporation, Munger held the position of chair on the board of the Daily Journal Corporation, a legal publisher based in Los Angeles.
Munger is credited with steering Buffett away from acquiring mediocre companies at low prices towards focusing on higher-quality, underpriced businesses. From 1984 to 2011, Munger served as the chair and CEO of Wesco Financial Corporation, a subsidiary of Berkshire Hathaway. The connection between Munger and Buffett began at a dinner in Omaha in 1959, and they maintained their relationship as Buffett built his investment firm, while Munger continued his work as a real estate attorney. On Buffett’s advice, Munger gave up on the practice of law in the 1960s to concentrate on managing investments.
Here are some of the words of wisdom offered by Charlie Munger.
Words Of Wisdom By Charlie Munger
There are huge advantages for an individual to get into a position where you make a few great investments and just sit on your ass: You are paying less to brokers. You are listening to less nonsense. And if it works, the governmental tax system gives you an extra 1, 2 or 3 percentage points per annum compounded.
Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day-if you live long enough-like most people, you will get out of life what you deserve.
In my whole life, I have known no wise people who didn’t read all the time — none, zero. You’d be amazed at how much Warren reads — and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.
A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.
One of the inane things taught in modern university education is that a vast diversification is absolutely mandatory in investing in common stocks. That is an insane idea. It’s not that easy to have a vast plethora of good opportunities that are easily identified. And if you’ve only got three, I’d rather it be my best ideas instead of my worst. And now, some people can’t tell their best ideas from their worst, and in the act of deciding an investment already is good, they get to think it’s better than it is. I think we make fewer mistakes like that than other people. And that is a blessing to us.
It takes character to sit with all that cash and to do nothing. I didn’t get top where I am by going after mediocre opportunities.
If you’re going to invest in stocks for the long term or real estate, of course there are going to be periods when there’s a lot of agony and other periods when there’s a boom. And I think you just have to learn to live through them. As Kipling said, treat those two imposters just the same. You have to deal with daylight and night.
Investing is not supposed to be easy. Anyone who finds it easy is stupid.
Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group then to hell with them.
I have a friend who’s a fisherman. He says, ‘I have a simple rule for success in fishing. Fish where the fish are.’ You want to fish where the bargains are. That simple. If the fishing is really lousy where you are you should probably look for another place to fish.
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