On 28 November 2023, investment sage and vice-chairman of Berkshire Hathaway, Charlie Munger, passed away aged 99.
Munger had a long and varied career, and made his first fortune before he met his future business partner Warren Buffett.
Buffett credits Munger with teaching him some of his most important investing lessons. He said Berkshire Hathaway “could not have been built to its present status without Charlie’s inspiration, wisdom and participation”.
Part of Munger’s legacy will be a wealth of knowledge and wisdom about investing. Read on to discover some of the key lessons you can learn from his work.
1. Never stop learning, and apply the lessons you learn regularly
Charlie Munger was rarely without a book in his hand. He was an enthusiastic advocate of continuous learning and self-improvement.
He said: “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 how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
In Munger’s opinion, it was vital to understand how to approach problems from a range of different perspectives. After all, “to a man with a hammer, everything is a nail”.
Reading widely can help you add more tools to your armament, giving you a broader understanding of how to approach challenges and helping you to make sensible choices.
2. Be wary of predictions
At this time of year, you’re likely to see plenty of articles making predictions about what might happen in the stock market and the economy in 2024.
Charlie Munger’s advice is to treat these predictions with caution. There are, after all, some much more reliable ways to make investment decisions.
He explained: “I don’t make money predicting accurately. We just tend to get into good businesses and stay there.”
Following the philosophy of seeking out good businesses to invest in – which Munger defines as well-run and profitable – is typically more likely to lead to long-term success than attempting to beat the market with predictions.
3. Take a long-term view of your investments
One of the most important factors in Munger’s investing success was his patience and persistence in holding on to stocks and shares. He once shared that “Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.”
This is a helpful guideline to apply to your own investing strategy. As you’re probably already aware, attempting to time the market rarely produces the desired effect. Instead, riding out the fluctuations you’ll inevitably see on the stock market during your career is much more likely to help you grow your money.
When it comes to successful investing, there are certainly no shortcuts.
4. Live life backwards
According to a report by CNBC, Munger once advised business partner Buffett to “live life backwards”.
In other words, start by thinking of the kind of life you want to live, and then take actions that will help you achieve your goal.
This sage advice applies to investing as much as it does to life, since money is purely a tool for helping you to achieve the lifestyle that you’d like. So, before you start investing, it’s helpful to have a clear idea of what you want to do with your money once you have accumulated wealth.
The reason this is so helpful is because you’re likely to invest differently if, for example, you want to retire early than you might do if you’re building up a nest egg to gift to your children after you pass away.
So, starting at the end and working backwards can be a helpful mantra to keep in mind for many different areas of your life.
5. Your own personal circumstances are the only thing that matters
Envy or jealousy is a natural human emotion, and one that can befall any investor who notices that others appear to be generating higher returns or accumulating wealth more quickly.
To this, Charlie Munger has a very simple answer: “So what?! Someone will always be getting richer faster than you. This is not a tragedy.”
Making investment decisions purely to “keep up with the Joneses” can hold you back from achieving your own personal goals. Instead, keep in mind what you would like to achieve in your life or what would bring true fulfilment. Then, design a portfolio that is balanced accordingly to help you achieve those goals.
Everyone’s goals and circumstances are unique, which is why your own portfolio is unlikely to resemble your friends’, neighbours’ or colleagues’.
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Here at Ascenta Wealth, we help expats in Singapore work towards their long-term goals by investing sensibly, in line with the philosophies that great investors like Charlie Munger teach.
If you’d like support from us in managing your wealth, please get in touch.