Charlie Munger of Berkshire Hathaway died on November 28, 2023, just a few weeks shy of his 100th birthday. He was one of the greatest and sagest investors of all time.
With his longtime partner Warren Buffett, he built Berkshire Hathaway to almost $800 billion in market value. It owns Geico Insurance, Burlington railroads, Dairy Queen, and See’s Candies, and stakes in Coke, Apple, American Express, Bank of America, and more.
Charlie was an antique and an anomaly in this modern era of FAANG stocks and now the Magnificent Seven, stocks that are priced richly for their potential to soar on new themes and memes. See: the AI angle driving a 334% rise in Nvidia in 2023 (from $148 a share to $495).
Rather than gamble on growth stocks like those, Munger was a “value investor,” seeking out overlooked fundamental and intrinsic value in underpriced stocks. A vanishing breed in 2023 when the Nasdaq rose a startling 43%.
Who knew? Almost nobody expected stocks to do this well.
Charlie Munger died with a net worth of $2.6 billion, and he earned every penny of it in the wisest, most patient ways of investing. Recently, an article on five pieces of advice from Charlie Munger ran on Yahoo Finance. I riff on them here.
1. ALWAYS SPEND LESS THAN YOU EARN.
Spending is the enemy of saving, and saving is the first step to investing.
And investing–rather than earning–is the key to building wealth and security.
2. INVEST WISELY. AND, ESPECIALLY, PATIENTLY. PLAY THE WAITING GAME.
Charlie: “The big money is not in the buying and selling but in the waiting.”
Studies show that the less you trade in and out of stocks, the better your returns will be.
3. KEEP ON LEARNING. ESPECIALLY ABOUT WHERE YOU WANT TO INVEST.
“The game of life is the game of everlasting learning. At least, it is if you want to win.”
Most importantly: read all about it, and read more every single day.
4. STAY DISCIPLINED. THE LONGER YOU DO, THE BIGGER AND BETTER THE RESULTS.
Good small habits have a multiplier effect: the benefits grow over time.
Work only with reliable people who know they can rely on you, in return.
5. AVOID TOXIC PEOPLE.
Charlie: “A great lesson of life is to get them the hell out of your life–and do it fast.”
People who are bitter, cynical, unkind, and negative drain your energy. Lose them.
Stay away from those who overindulge in alcohol, drugs, and unsafe sex.
Some market cynics say that almost anyone who invests in the markets for so long, over so many decades, ends up looking like a genius. After all, in the past 200 years, at the end of any given period of ten years, stocks ended up 98% of the time. Time is on our side.
This view falls short of the true brilliance and consistently excellent investing record of Charlie Munger and Warren Buffett. As The Wall Street Journal just reported, in the past 40 years, the S&P 500 stock index rose almost 2,800%, while shares of Berkshire Hathaway rose an astonishing 41,000%.
Seems to me that Charlie Munger’s advice merits our close consideration, yes?