scorecardresearchCharlie Munger’s pearls of wisdom for investing money in the stock market

Charlie Munger’s pearls of wisdom for investing money in the stock market

Updated: 24 Jun 2022, 06:31 PM IST
TL;DR.

Great minds discuss ideas. Charlie Munger’s ideas underscore his competence and perseverance which have helped him to achieve success, albeit a bit later in life. This self-made billionaire investor draws heavily from his knowledge and experience to solve complex problems of investing in the stock market. 

A woman shows a card with photos of Warren Buffett (L) and Charlie Munger (R) during the Shareholder Shopping Day at the Berkshire Hathaway Shareholders Meeting at CHI Health Center in Omaha, Nebraska on April 29, 2022. (Photo by CHANDAN KHANNA / AFP)

A woman shows a card with photos of Warren Buffett (L) and Charlie Munger (R) during the Shareholder Shopping Day at the Berkshire Hathaway Shareholders Meeting at CHI Health Center in Omaha, Nebraska on April 29, 2022. (Photo by CHANDAN KHANNA / AFP)

A great mind of the 20th century and second-in-command to Warren Buffett at Berkshire Hathaway, Charlie Munger has shared the investment philosophy that helped him cruise the ups and downs in life as well as the market. For the unversed, Munger is the Vice Chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett. This famous American investor, businessman and philanthropist has been Buffett’s right hand since 1978.

As the volatility in the stock market has upset many investors’ plans while fuelling their apprehensions regarding wealth creation, it is time to sit down and revisit Munger’s timeless lessons that are invaluable and remarkable as much as his experience. While there are innumerable lessons to learn from this man synonymous with resilience, the following investing philosophies will lend you an insight into what makes him different from most other investors.

Persistence is the key

Being determined towards your goals is important. You must not aim to move mountains in a day. Rather face each day as a challenge and an experience that you must learn from. Learn from your lessons. That way, you will become better and wiser than you were before. Apply your knowledge and skills to face unforeseen challenges. No matter how exacting the circumstances may be, they must not change your personality. You can either win or lose in the stock market; however, only the winning personality survives.

Don’t devalue honesty

Honesty is still the best policy as it is practically impossible to succeed unless you are honest. The quality of being forthright and open is a prerequisite to being successful, be it in life or business. You must be sincere with your opinions, customers and partners irrespective of how grim the circumstances may seem. Investors who park their money in honest companies are bound to earn favourable returns as opposed to those putting their earnings in companies manipulating their payoffs to survive in the market.

Remaining high-spirited

The biggest disservice you can do to yourself is wallowing in self-pity. Life will have a lot of ways to throw you under the bus. Struggles will be plenty, no doubt. But this must not deter you to help yourself. Pitying the self for whatever goes wrong in your life is like expecting people around you to empathize and sympathize with you. Munger’s greatest take on life is, “If anyone can help you through your difficult times…it’s you.” Stop seeking attention from people considering how this behaviour will bend and break you beyond an unmanageable level. This behaviour applies to stock markets. There will be times when stocks would be priced much below their valuation. Instead of pitying the situation, try to look on the bright side of things as adding stocks of value today will help you earn returns in the future. Hanging on to a problem will not solve it; rather focus on ways you can find the solution(s) to it.

Discipline yourself

Charlie Munger reiterates the three essential principles of investment, viz., honesty, discipline and ethics. This veteran investor is a stickler to ethics who strongly believes in taking the honest and disciplined route to create a huge wealth in terms of money, knowledge, structure, etc. Both traders and investors must discipline themselves to earn abundant peace despite the constant turmoil in the stock market.

Read more

Charlie Munger has described how his penchant for reading has helped him look at old things in a new way. He attributes his distinct outlook toward life and business to his reading habits. Munger explains how the same problem can be solved in different ways. Munger stressed that if you want to solve a problem, you must first unlearn all the things that you had learned from your previous experiences. Draft a new strategy for every new investment that you want to make. In Charlie Munger’s words, “Always take the high road, it’s far less crowded!”

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First Published: 24 Jun 2022, 05:26 PM IST