Here are 10 Investing Principles I Learnt from Charlie Munger
Charlie Munger once said: "When everybody goes insane, staying sane is your competitive advantage."
It's more relevant than ever as fresh IPOs are getting 10-20x sales multiples and quantum stocks losing money are ripping.
Here are 10 investing principles I learnt from him: 🧵
1/ Invert, always invert.
If you want to make money, learn not to lose first.
Warren Buffett says, "I made most of my money in stocks that I thought I wouldn't lose much, not on the ones that I thought would be big winners."
2/ Wait for the perfect pitch.
The secret of great hitters in Baseball is waiting for the right pitch.
That applies to investors, too.
You don't have to jump on everything that slightly looks like an opportunity.
Wait for an obvious, big, fat pitch.
3/ Buy what you know better than others.
If you are a doctor, don't chase hot supercomputer or AI silicon stocks.
You have a natural edge in pharmaceuticals, healthcare, medical devices etc.. Use it.
Play the game in which you are a genius and others are stupid.
4/ Be a permanent owner of exceptional businesses.
Don't set any exit price targets or sell because the market got too expensive etc...
The real money is made by buying exceptional businesses and sitting on them as long as they remain exceptional.
That's the whole trick.
5/ When you see an opportunity, act fast.
Most people spend too much time assessing whether what could be an opportunity is really an opportunity.
Opportunity windows are generally brief, and to take full advantage, you have to act fast and bet big.
6/ Don't overpay for an exceptional business.
No matter how great a business is, nothing can justify an infinite price.
Regardless of the nature of the business, you must insist on a margin of safety.
7/ Keep it simple.
Peter Lynch once said, "All the math it takes to succeed in investing comes at 6th grade."
If you find yourself creating complex valuation models with Monte Carlo analysis, you are on the wrong path.
8/ Take the long view.
Nobody can know what the market will do in the next 6 months or so.
What you should be thinking about is owning great businesses that'll increase their own value over time.
The market will eventually recognize it in the long term.
9/ Keep calm in market crashes.
The hardest part of investing isn't finding attractive opportunities; it's emotional control.
Most of the reward doesn't come from spotting a nice business; it comes from being able to sit on it with equanimity in a market crash.
10/ When there is a fat pitch, bet big.
Occasionally, even the strongest companies like Coca-Cola, American Express, and Amazon trade at ridiculous prices due to fear in the market.
At those times, you don't just bet on them, but you bet big to really take advantage of it.
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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
