Charlie Munger is Warren Buffett’s right-hand man and also an accomplished investor in his own right.
Warren Buffet is known as the world’s greatest investor and it can be said that Munger is the investment world’s most exceptional thinker. Indeed, it was Munger that inspired Buffett to change his strategy away from value towards quality, and ever since he joined Berkshire Hathaway, Charlie has proven himself to be a highly valuable filter of ideas for Buffett.
“Opportunity cost is a huge filter in life. If you’ve got two suitors who are really eager to have you and one is way the hell better than the other, you do not have to spend much time with the other. And that’s the way we filter out buying opportunities.” — Charlie Munger
Since the beginning of his career, Charlie has been prepared to take high stakes bets on high conviction opportunities. He’s not prepared to let any high conviction ideas pass him by, and wants to make the most out of the best opportunities.
”When any guy offers you a chance to earn lots of money without risk, don’t listen to the rest of his sentence. Follow this, and you’ll save yourself a lot of misery.” — Charlie Munger
But as well as wanting to make the most out of the best opportunities available to him, Munger is also keenly aware there are many more investments out there worth avoiding than buying. Avoiding these, and putting as much as you can into the most obvious bets, is Charlie’s preferred strategy, and the one that’s made him billions of dollars over the years.
“Someone will always be getting richer faster than you. This is not a tragedy.” — Charlie Munger
Munger and Buffett made billions by staying away from investment fads and fashion, investing on their terms in unattractive industries at attractive valuations with skilled management teams. If you want to succeed, it might be best to do the same.
“Our ideas are so simple that people keep asking us for mysteries when all we have are the most elementary ideas.” — Charlie Munger
It would be a mistake to think that just because Charlie and Warren are good at investing, They spend hours toiling over spreadsheets. The opposite is true. Rather than trying to be smart and beat the market all the time, they are just looking for simple mispriced bets while at the same time, trying to avoid the biggest pitfalls.
“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart…” — Charlie Munger
Indeed, even though he is possibly one of the smartest investors out there, Munger understands his weaknesses, which is probably why he has achieved the record he has.
“You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.” — Charlie Munger
With many decades of experience behind him, Munger knows what to look for when hunting for the most undervalued stocks. And it’s not only valuation that he has on his side, it’s also his ability to sit still when others are rushing about.
“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.” — Charlie Munger
Unlike many other investors, Charlie and Warren are prepared to wait for years or decades for a trade to pay off. Time is almost certainly an investor’s best friend.
Not only does overtrading create more work for yourself, but it is also increasing the chance you will find yourself dating a toad.
It is better to sit back, relax and let time do the heavy lifting.