31 augustus 2023 | by justETF
Tap into the amazing insight of Warren Buffett’s right-hand man
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- Reading duration: 10 minutes
What to expect in this article
As vice-chair of Berkshire Hathaway, Charlie Munger is famous for his illustrious business partnership with Warren Buffett.
Although less well known than Buffett, Munger is a unique source of investing acumen who brings an original perspective to the challenges we face when plotting our financial futures and making our way in the world.
As Buffett says: “Charlie marches to the beat of his own music, and it’s music like virtually no one else is listening to.”
So let’s tune in and find out what we can learn about investing and life from one of the greats.
Munger on investing psychology
First and foremost, Charlie counsels that successful investing means mastering our emotions:
1:"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."
Neither must we succumb to overconfidence.
2:“It's remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."
That means neither Munger nor Buffett are afraid to admit their own limitations in the face of hype and the ‘next big thing’:
3:“We have three baskets for investing: yes, no, and too tough to understand.”
Often investors are tempted to make unwise bets due to FOMO (= fear of missing out) but Munger preaches against the politics of envy:
4:“Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley?”
What’s more, he doesn’t think we should be in too much of a hurry:
5:“The desire to get rich fast is pretty dangerous.”
Given his incredible success, Munger’s humility is instructive.
6:“Someone will always be getting richer faster than you. This is not a tragedy.”
Ultimately, Berkshire’s other living legend favours a get rich slowly approach:
7:“Live within your income and save so that you can invest.“
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Munger on long-term thinking
Perhaps unsurprisingly for someone who will be 100-years-old in 2024, Charlie believes that patience is a secret weapon.
8:“It’s waiting that helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
Indeed, along with Buffett, Munger advocates a buy-and-hold strategy:
9:“We’re partial to putting out large amounts of money where we won’t have to make another decision.”
Charlie sees proper investing as a long game that takes time to payoff:
10:“The big money is not in the buying or the selling, but in the waiting.”
One major advantage of taking the long view is you can afford to ignore the short-term volatility of the stock market:
11:“Like the weather, I just ignore the weather. I just try to invest whatever capital I have as best I can and take the results as they fall. I just seize whatever opportunities I can and I hope I get my share.”
Munger on success
Many of Charlie’s greatest insights apply as equally well to life as they do to investing …
12:“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Slug it out one inch at a time, day by day.”
Despite his own inestimable knowledge, Munger has always remained admirably humble:
13:“Acknowledging what you don’t know is the dawning of wisdom.”
And he recognises that we all fall short at times:
14:“There’s no way that you can live an adequate life without many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.”
The silver lining is that we grow by learning from our mistakes:
15:“The most important thing is knowing where you are competent and where you aren't. The human mind tries to make you believe you are smarter than you are. Rub your nose in your mistakes.”
But perhaps one of Munger’s greatest pieces of advice is to invest in your own character and standing within your profession and community:
16:“To get what you want, deserve what you want. Trust, success, and admiration are earned. It’s such a simple idea. It’s the golden rule so to speak: You want to deliver to the world what you would buy if you were on the other end.”
17:“Remember that reputation and integrity are your most valuable assets — and can be lost in a heartbeat.”
That’s wonderful advice from one of the most successful investing and business minds that the world has ever known.
justETF Tip:Want more? Read the 10 most important by André Kostolany.
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FAQs
"You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long, time." "Remember that reputation and integrity are your most valuable assets, and can be lost in a heartbeat." "There's no way that you can live an adequate life without making many mistakes."
What was Charlie Munger's most famous quote? ›
"You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long, time." "Remember that reputation and integrity are your most valuable assets, and can be lost in a heartbeat." "There's no way that you can live an adequate life without making many mistakes."
What was Charlie Munger's greatest advice? ›
He observed, “Patience is a virtue, but you will never ever get anywhere if you don't do something.” Munger believed you must work hard to sift the world for a mispriced asset while being mindful that you will only seldom find one: “The wise ones bet heavily when the world offers them that opportunity.
What are the lessons from Charlie Munger? ›
Charlie Munger believes that humility is a crucial character trait. He says that people who are humble are more likely to be successful in the long run because they're not arrogant. Arrogance leads to overconfidence, which leads to making mistakes.
What is a strong quote about investing? ›
“Invest for the long haul. Don't get too greedy and don't get too scared.” “Waiting helps you as an investor and a lot of people just can't stand to wait. If you didn't get the deferred-gratification gene, you've got to work very hard to overcome that.”
What are the words of wisdom by Charlie Munger? ›
Charlie Munger Quotes
“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Systematically you get ahead, but not necessarily in fast spurts. Nevertheless, you build discipline by preparing for fast spurts.
What is the most famous quote ever said? ›
“I have a dream.”
– Martin Luther King Jr.
What was Charlie Munger's philosophy? ›
Munger believes that by going over your decision-making process and carefully using skills, ideas, and models from many disciplines, you can more consistently not be stupid. You will always make some bone-headed mistakes even if you're careful, but his process is designed to decrease the probability of those mistakes.
Are Warren Buffett and Charlie Munger friends? ›
Warren Buffett on his friendship with Charlie Munger: We never had any doubts about the other person. Berkshire Hathaway Chairman and CEO Warren Buffett presides over the 2024 Berkshire Hathaway annual meeting.
Why financial advisors loved Charlie Munger? ›
Munger was known for his investing wisdom, his dry wit, and the brutally direct manner in which he dismissed what he deemed to be investment fads. As an investor, his patient approach and focus on fundamentals were traits that many aspired to but didn't always match.
Smart old people also have a cute side. In fact, Munger's wisdom isn't just reflected in his investments. If you've listened to his speeches, talked to him, or read related text or video recordings, you probably have a similar feeling: I think he is not only a big investor, but also a wise man and philosopher.
What did Charlie Munger teach Warren Buffett? ›
We all know that when Buffett began his investing career, he was looking at “cigar butts,” something that had one or two good more puffs left in it, but Munger's influence really forced him to focus more on higher-quality companies and being able to pay a higher price point for those companies.
How much of Berkshire does Charlie Munger own? ›
How much Berkshire Hathaway stock did Munger hold at the time of his death? Most of Munger's net worth at the time of his passing was in the form of Berkshire Hathaway Class A stock, of which he owned 4,033 shares as of Oct. 5, 2023.
What is the most powerful quote in the world? ›
10 of the most powerful quotes in the world
- The simple things are sometimes the most significant — Anon.
- Strive not to be a success, but rather to be of value — Albert Einstein.
- Remembering you are going to die is the best way I know to avoid the trap of thinking you have something to lose — Steve Jobs.
“Investing in yourself is the best investment you will ever make. It will not only improve your life, it will improve the lives of all those around you.” “In this world you're either growing or you're dying, so get in motion and grow.”
What is a famous quote about the stock market? ›
Be greedy when others are fearful.” – By Warren Buffett. Going against the majority is the true way to make windfall gains in the stock market. This is one place where trying to fit in can be a giant mistake. Among the motivational quotes here, this one by Warren is probably the most famous one on this entire list.
What is the most famous line of all time? ›
A jury consisting of 1,500 film artists, critics, and historians selected "Frankly, my dear, I don't give a damn", spoken by Clark Gable as Rhett Butler in the 1939 American Civil War epic Gone with the Wind, as the most memorable American movie quotation of all time.
What is Warren Buffett's most famous quote? ›
"Price is what you pay. Value is what you get." Buffett is widely celebrated as the greatest value investor of all time – and with good reason. That's exactly why this 2008 quote resonates.
What is the famous line of Charlie and the Chocolate Factory? ›
“You should never, never doubt something that no one is sure of.” Mr. Wonka: “Don't forget what happened to the man who suddenly got everything he wanted.” Charlie Bucket: “What happened?” Mr. Wonka: “He lived happily ever after.”
What was the quote from Poor Charlie? ›
The quote by Poor Charlie's Almanack, "Spend each day trying to be a little wiser than you were when you woke up," reminds us of the importance of continuous learning and personal growth. It emphasizes the need to approach every day with an open mind and a thirst for knowledge.
