Produced by: Aakanksha Ram Chaturvedi Designed by: Manoj Kumar
Charlie Munger, celebrated investor and the vice chairman of Warren Buffet-led Berkshire Hathaway group, passed away at 99 on November 28, Tuesday. Munger was known for his successful investments. Here are top ten investment advice taken from his book Poor Charlie's Almanack.
Munger’s book read, “All investment evaluations should begin by measuring risk, especially reputational.” By this, he means that all investors need to have an appropriate margin of safety to ensure they avoid permanent loss of capital.
“Only in fairy tales are emperors told they're naked,” the book read. This means that just because other people agree or disagree with the investor, doesn’t make their decision right or wrong. The only thing that matters is the correctness of the investor’s analysis.
Munger highlighted in his book that prior research and preparedness cannot be ignored at any cost. “The only way to win is to work, work, work, and hope to have a few insights. If you want to get smart, the question you have to keep asking is “why, why, why,” the book noted.
“Acknowledging what you don't know is the dawning of wisdom,” Poor Charlie’s Alamnack highlights. Munger noted that good investors need to stay within a well-defined circle of competence and need to identify and reconcile disconfirming evidence.
The vice chairman of the Berkshire Hathaway group also gives a lot of emphasis to rigorous analysis. His book read, “Use effective checklists to minimise errors and omissions. Determine value apart from price; progress apart from activity; wealth apart from size.”
“Proper allocation of capital is an investor's No. 1 job,” Munger noted. Munger strongly advised that an investor has to manage their capital well and allocate keeping the risk and opportunities in mind.
“Resist the natural human bias to act,” Munger noted. He reasoned that his wealth has been accumulated through years and only with the virtue of patience he has been able to grow his money with time.
The celebrated investor also stressed on the need for being decisive when it comes to wealth creation. His book reads, “When proper circumstances present themselves, act with decisiveness and conviction.”
Be ready for change, Munger said. “Accept unremovable complexity,” his book read. He stressed that investors need to continuously challenge and willingly amend their beliefs about financial products.
“Keep it simple and remember what you set out to do,” Munger said. He said that goals need to be defined clearly and investors should not deviate from the goals they set out to achieve.