5 Investment Insights by Charlie Munger

Charlie Munger is an incredible investor and partner at Warren Buffet in Berkshire Hathaway. He recently gave an interview to CalTech alumni, which has a lot to teach us about investing.

He argues that good investment requires a strange combination of patience and aggression. And not many people have it.

It also requires a great deal of self-awareness about how much you know and how much you don’t know. You need to know the edge of your own competence.

Some people are born to be investors – Charlie points out that not everything can be learned by investing. Yes, you can read all the great investment books out there. You can research all the previous big investors. However, this is necessary, but not enough. You also need certain qualities that some people have and others just don’t.

Temperament – What does it mean? Imagine a scenario in which everything related to investing goes wrong. The stock market marks your investment down. Your peers do not agree with you. Your customers are beginning to doubt you. You haven’t had a good year on the market in a long time. Can you still stick to your well-argued investment process? Or will you disintegrate and succumb to the pain and begin to deviate to try to catch up sooner rather than later?

Patience – It seems so simple. Just don’t do anything when there’s nothing worth doing. And yet, this seems so elusive to most investors. They convince themselves or are convinced by others that only if they have been smart enough, work hard enough, there will always be something intelligent to do. So they glide down the slippery slope of “good enough.”

Aggression – Despite all their activity, when in fact it is time to act, most investors are not active enough! “I remember Peter Lynch coming to talk to Fidelity’s partner managers and analysts at the beginning of my career, about 20 years ago. He told the audience that when they find a great idea, they should triple their investment in it. There was silence. No one agreed with the legendary investor. However, when portfolio managers returned to their offices the next day, I did not notice anyone changing their approach or portfolios, which usually contained hundreds of small, individually insignificant investments.

Self-awareness about the limits of your own competence – Knowing the limits of your sphere of competence is crucial as an investor. If you’re not sure if there’s something in it, the answer is simple: it’s not. The penalty for waiting to invest is low, as long as you aggressively pursue the few big investment opportunities you encounter.
Charlie Munger has given us a lot of insights about investing before. To remain rational. To assess the quality of the company, not just the statistical cheapness of the shares. Pay attention to the insight and integrity of the management team.