Remembering the Legend!CPT Markets analysts take you on a lifetime of Charlie Munger's investment philosophy!
Charlie Munger, vice chairman of Berkshire Hathaway, a legendary American stock market, passed away peacefully in a California hospital at the age of 99. In response, Warren Buffett (Warren Buffett) and his joint investment empire issued a statement, emphasizing that without Charlie Munger's inspiration, wisdom and involvement, Berkshire would not have been able to achieve the preeminence it is today.
Lucien, an analyst at CPT Markets, said that whenever the Berkshire shareholder meeting is held, Charlie Munger can be seen sitting next to Buffett to personally answer shareholders' questions. Although Munger is not as well-known as Warren Buffett, the two have worked together for more than a while, and Munger is quite representative in the field of value investing and has made outstanding contributions to the financial field. For example:
Munger became Berkshire's first vice chairman in 1979 and assisted Warren Buffett in developing management and investment strategies that resulted in Berkshire achieving an average of more than 20% annual value growth and generating strong returns for shareholders.
Charlie Munger's net worth as of April 2022 is estimated at about $2.6 billion, according to Forbes, a surprising figure that has deducted the corresponding spending on years of involvement in public welfare.
And that's why Warren Buffett strongly recommends that when looking for a partner, you should pick someone who is smarter and wiser than yourself, especially when making a big loss, and the partner must not point fingers or show impatience with you. He made it clear that for the past 60 years, Munger was the only one who met such a standard.
CPT Markets analysts shared an interesting phenomenon, although Buffett and Munger are always at odds, but to be honest, they have never really quarreled during their 60-year cooperation. Comparatively, Munger's cross-examination often prompts Buffett to delve deeper into the details of an investment before making that investment, and the advantage of this approach is that it helps to reveal potential behavioral biases that can unwittingly penetrate people's minds and negatively affect investment decisions.
Munger advocates finding good companies, buying them and holding them for the long term, quietly waiting for the return on investment. And this kind of investment philosophy completely changed Buffett's early way of thinking of buying cheap and focusing on penny stocks, and after absorption and transformation, the well-known Buffett value investment concept was formed.
What is Munger's investment philosophy that we should learn from?CPT Markets analysts present several key points for readers' reference.
Develop the habit of reading a lot!Munger emphasized that the mental model framework is a particularly important concept when thinking about anything, as long as we have enough mental models, we can find the right solution to most problems as quickly as possible. The most special thing is that it is not only required that you learn the thinking model related to finance, if you can try different fields, such as history, mathematics, psychology, philosophy, biology, etc., then you will be able to obtain greater value through cross-application.
Munger once said, "If something is too complicated for us to understand, it's best to avoid it." The implication of this is that neither he nor Warren Buffett invests in areas that they can understand. In this regard, he also said that he summarized the potential investment objectives of the market into three categories: understandable investment, inappropriate investment, and difficult to understand, while he only focuses on understandable investment objectives and waits patiently for the best time to make a move.
Before thinking about anything, Munger always focuses his thinking on how to succeed and what actions can be taken to avoid failure, and this concept is called "reverse thinking", which means that before making any investment, investors should consider risk first, not profitability.