10 Investing Lessons To Learn From Charlie Munger

This Tuesday, we lost one of the gems of the investment world – Charlie Munger. He was an integral part of Berkshire Hathaway for the last 60 years and a friend to the world’s most famous investor, Warren Buffett.

Berkshire Hathaway CEO Warren Buffett said, “the conglomerate could not have been built to its present status without Charlie’s inspiration, wisdom and participation.”

At the age of 99, Charlie Munger left the world at California Hospital; however, his lessons for life and investments will keep him alive. This article will look at a few investing lessons to learn from.

 #1 Prioritizing Being Rational and Objective

Charlie Munger always prioritized having an objective and being rational in life and investing.

“Rationality is not just something you do so that you can make more money; it is a binding principle,” Munger said. “Rationality is a really good idea. You must avoid the nonsense that is conventional in one’s own time.”

Emotional decisions can often lead to future regrets, and in investments and business, letting your emotions rule is a strict ‘NO.’

#2 Real Independence Comes With Financial Freedom

Charlie Munger believed that true independence comes with financial freedom. The desire to get wealthier must be linked to independence, not material things.

Munger often said, “Like Warren, I had a considerable passion to get rich. Not because I wanted Ferraris – I wanted the independence. I desperately wanted it”

Charlie Munger was one of the wealthiest Americans, with a net worth of around $2.6 billion, even after donating a significant part of this wealth.

#3 Being Deserving To Get What You Want

“To get what you want, you have to deserve what you want,” Munger said. “The world is not yet a crazy enough place to reward a whole bunch of undeserving people.”

This is so simple and yet so powerful, isn’t it? You must deserve to get what you want; otherwise, success can be short-term. Only people who work hard consistently and have integrity are the ones who can survive and prosper in the long run.

#4 Focusing On Not Being Stupid

People always want to be intelligent and happy, but Munger always believed the opposite.

“It is remarkable how much long-term advantage people like [Warren and myself have gotten by trying to be consistently not stupid, instead of trying to be very intelligent,” Munger said.

If you know exactly what you shouldn’t do, life becomes much easier, but people hardly ever do that. Understanding your shortcomings, which can let you down, is the first step to success. Once you understand the same, you can work on them and turn them into your strengths, right?

#5 Never Stop Learning

I have said that in my whole life, I’ve known no wise person over a broad subject matter area who didn’t read all the time,” Munger said, adding that reading is critical for broad subjects such as investing. “If you think you’re going to be good at it and not read all the time, you have a different idea than I do.

Munger always prioritized education, and his significant donations went to universities. He considered education to be the moral duty of every human being.

#6 Never Over Diversify

Unlike other experts, and even Warren Buffet, who emphasizes diversifying investment portfolios, Munger always wanted his investments to have concentrated bets.

The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification,” Munger said. “I just think the whole concept is literally almost insane. It emphasizes feeling good about not having your investment results depart very much from average investment results.

#7 Investing In Companies With Strong Moats

Charlie Munger believed in investing in companies engaged in such businesses, which have strict barriers to entry. This helped him generate wealth over time as companies with fewer rivals enjoyed better market share and market capitalization benefits.

#8 Long-term Thinking Is The Key

This lesson continues: If you want to invest in companies with a strong moat, you must think long-term. Equities are inevitably volatile; however, the right company choice can generate significant returns in the long run.

#9 Choosing The Right Role Model

It’s not just Warrant Buffet who followed Benjamin Graham as a mentor for his investment journey; Charlie Munger shared the same faith and belief. He always emphasized the choices of role models that one picks. It is crucial for defining your investment journey and life.

“There is no reason to look only for living models,” Munger said. “The eminent dead are, in the nature of things, some of the best models around.”

#10 Learn and Share

Finally, one of his famous quotes, which is more than just an investment lesson, is –

The best thing a human being can do is to help another human being know more.

We are sure you’ve noted his lessons and will try to apply them in your investing journey. Remember, your investment goals and journey are unique. The way to go is looking for a certified investment advisor who can guide and help you invest better.

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