- Charlie Munger Investment History
- Charlie Munger Investment Advice
- 1. Look to Fundamentals
- 2. Value Doesn’t Mean Cheap
- 3. Intangibles Matter
- 4. Understand Your Investments
- 5. Know Your Limits
- 6. Trust in Compounding Returns
- 7. Be Prepared when Opportunity Arrives
- 8. Think from a Different Perspective
- 9. Find Productive Ways to Move on from Losses
- 10. Knowledge is a Worthwhile Investment
- Conclusion: Charlie Munger Investment Advice
Charlie Munger is the business partner of Warren Buffett and the vice-chairman of Berkshire Hathaway. Munger’s investment philosophy closely mirrors that of Buffett – he believes in investing in strong businesses with a long-term mindset.
In this article, we’ll take a closer look at Munger’s investment history and share 10 pieces of investment advice he’s offered for investors. Let’s get started!
Charlie Munger Investment History
Charlie Munger began his career as a real estate attorney but switched to managing investments in 1962. He formed the investment firm Wheeler, Munger, and Company and generated annual returns of over 19% until leaving the firm in 1975.
Munger joined Warren Buffett’s Berkshire Hathaway as vice chairman in 1975 and continues to hold the position today. He also became CEO of Wesco Financial Corporation in 1984, an investment firm that is now a subsidiary of Berkshire Hathaway.
Munger is worth an estimated $1.9 billion.
Charlie Munger Investment Advice
Charlie Munger has offered a huge amount of advice for investors over his long career through books and many interviews. Like Warren Buffett, he is a staunch believer in long-term value investing.
Let’s take a look at 10 of Munger’s top pieces of advice for investors.
1. Look to Fundamentals
Munger’s investment philosophy is based entirely around fundamental value. He has gone so far as to declare that “all intelligent investing is value investing.”
What that means for investors is that things like financial statements, product moats, and other factors that determine a business’s long-term success are far more important than day-to-day share price movements. Stock prices should be viewed primarily in relation to the underlying company they represent.
2. Value Doesn’t Mean Cheap
While Munger believes in value, he stresses that value doesn’t necessarily mean cheap. According to Munger, “a great business at a fair price is superior to a fair business at a great price.”
Investors should put a company’s quality first when making investment decisions and consider value only after finding a company worth investing in.
3. Intangibles Matter
While Munger believes investors need to look at companies’ financial statements and balance sheets, he argues that there’s more to a business than just the hard numbers. “People calculate too much and think too little,” says Munger.
It’s just as important to look at intangibles like the vision of the management team, the company’s culture, and its competitive moat.
4. Understand Your Investments
Munger, like Buffett, believes that you should be able to understand how any company you invest in makes money. According to Munger, Berkshire Hathway has “three baskets for investing: yes, no, and too complicated.”
That means that you should focus mainly on market sectors you know. It also means that if you can’t understand how a business operates or why it’s valued the way it is, you should pass on it.
5. Know Your Limits
Munger also cautions investors to know their limits. “Knowing what you don’t know is more useful than being brilliant,” he says.
What you don’t know can hurt you when it comes to investing. It’s important to see out advice from people who might know more than you, especially when an opportunity looks too good to be true.
6. Trust in Compounding Returns
One of the keys to Munger’s success has been patience. “The big money is not in the buying or selling,” he says, “but in the waiting.”
Seeing a return on investment takes time, which is why Munger is a believer in investing for the long run. Returns compound over time, so the longer you hold onto a winner, the better your eventual payoff.
7. Be Prepared when Opportunity Arrives
Opportunities arrive only rarely and don’t last long, so you need to be ready to take advantage of them. That’s why Munger recommends keeping a pile of cash in reserve, ready to throw at your best ideas.
For many investors, that means resisting the temptation of putting money into the market even when there aren’t any great opportunities. Munger notes that “it takes character to sit with all that cash and to do nothing.” But, he says, “I don’t get to where I am going” by chasing “mediocre opportunities.”
8. Think from a Different Perspective
Munger encourages investors not to think only about the case for why their investment idea is right, but also about the case for why it could be wrong. “You must force yourself to consider opposing arguments,” he says, “especially when they challenge your best-loved ideas.”
Look for second opinions and put as much work into challenging your investment thesis as you put into bolstering it.
9. Find Productive Ways to Move on from Losses
Like many great investors, Munger believes that emotion has no place in investing. “Generally speaking,” he says, “envy, resentment, revenge, and self-pity are disastrous modes of thought.”
If you take a loss or an opportunity doesn’t work out, it’s important to move on quickly. The faster you can let things go and focus on the next investment, the better you’ll perform over the long run.
10. Knowledge is a Worthwhile Investment
Munger encourages investors to “spend each day trying to be a little wiser than you were when you woke up.” He points out that over a whole lifetime, even a little bit of learning each day can add up.
So, make it a point to read a little bit or seek out advice every day. Munger also believes that investors should cast a wide net when it comes to subject matter, since you never know what topic will inspire a new idea.
Conclusion: Charlie Munger Investment Advice
Charlie Munger has spent over 45 years at the right hand of Warren Buffett as the vice chairman of Berkshire Hathaway and is one of the most successful investors in modern history.
Munger takes a long-term view of investing and uses a value-driven approach to choose investments. Above all else, Munger encourages investors to closely study the companies they want to invest in and to stick to investing in high-quality companies.