Berkshire Hathaway co-founder and long-time friend of Warren Buffett, legendary investor Charles Thomas Munger has built a following of his own among the community. The late billionaire left behind a treasure trove of tried and tested investing advice over the years.
Even Buffett (95), dubbed ‘The Oracle of Omaha’ due to numerous impeccable investment decisions over the years, credits for teaching him a few things.
In an obit piece after Munger passed away in November 2023, Bloomberg noted his importance as a “straight man and scold of corporate excesses” who provided a reality check and balance against fame and wealth.
Quote of the Day by Charlie Munger
“We have three baskets for investing: yes, no, and too tough to understand.”
What does Charlie Munger’s quote mean?
Throughout his years giving advice, Munger is a staunch advocate for investing only in the sectors and businesses that one understands. Speaking to BBC some years back, Munger also outlined four major principles he used before making investment bets: Understanding what you’re investing in, identifying the business’ intrinsic value, examining the company’s management, and putting an offer at the right price. He believed that the first qualifier to making an investment is “to deal with things that we’re capable of understanding”.
According to Munger, one cannot successfully invest in a business and get good returns without understanding what the business does, how it plans to make money, or what market opportunities exist for that business. You must also be aware of its USP, in case of high competition.
This is a belief also shared by Buffett, who feels investors to be aware of what they are getting into. In 2011, he told Bloomberg that he initially “” for tech stocks, but he does not regret it because he did not understand the business.
The duo consistently advised investors to focus on businesses and sectors they truly understand by avoiding trends and focusing on value proposition, i.e. well-established companies with a clear growth path.
Master of wit: Who is Charlie Munger?
Known for his sharp wit, brutal honesty, and no-nonsense thinking, Munger was one of the architects behind Inc.’s success alongside best friend and business partner Buffett. For almost 60 years the duo transformed the company from a failing textile maker into an empire, worth billions.
A lawyer by training, Munger helped Buffett, who was seven years his junior, craft a philosophy of investing in companies for the long term. Buffett has credited him with shaping Berkshire Hathaway’s investing style and pushing the ‘’ away from cheap “cigar-butt” stocks toward high-quality businesses at fair prices.
Under their management, Berkshire averaged an annual gain of 20% from 1965 through 2022 — roughly twice the pace of the S&P 500 Index. Decades of compounded returns made the pair and folk heroes to adoring investors.
Munger was vice chairman of Berkshire from 1978 until the day he died at 99 in 2023. He was also among the company’s biggest shareholders, with stock valued at about $2.2 billion. His overall net worth was about $2.6 billion, according to Forbes.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
