Charlie Munger, the celebrated investment guru and Warren Buffett’s indispensable ally at Berkshire Hathaway, passed away at age 99 in late November.

His net worth, estimated at US$2.3 billion (RM10.9 billion) as of early last year, paled in comparison to Buffett’s but was nonetheless a testament to his investment acumen.

Munger’s experience allowed him to provide invaluable insights in various financial areas, providing guidance for both investment and life. Here are five of his pearls of wisdom.

1. “All intelligent investing is value investing, acquiring more than you are paying for. You must value the business in order to value the stock.”

This quote encapsulates Munger’s investment philosophy, which focuses on understanding the intrinsic value of a business and ensuring that what you pay for a stock reflects more than its price tag.

Munger’s approach to value investing was not just about picking stocks with low prices. Instead, he stressed the importance of understanding the business behind the stock, its competitive advantages, and its potential for sustained success over time.

He believed in investing in businesses that could withstand mismanagement because “any fool can run them, and someday a fool will”. This perspective underscores the importance of choosing companies with solid foundations and resilient business models.

2. “The big money is not in the buying and the selling but in the waiting.”

This quote emphasises the importance of patience in the investment world. It suggests that significant financial gains are often achieved not through frequent trading but by holding on to investments over a longer period, allowing them to mature and grow in value.

This perspective aligns with the broader principles of value investing, where the focus is on long-term growth rather than short-term gains. It underscores the belief that time in the market, rather than timing the market, often leads to better investment outcomes.

Munger’s advice reflects a disciplined approach to investing, where patience and a deep understanding of the business are key to successful investment strategies.

3. “I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than when they got up and boy, does that help – particularly when you have a long run ahead of you.”

In his 2007 USC Law School commencement address, Munger highlighted the significance of being a “learning machine”. He observed that many individuals who achieve success in life are not always the smartest or most diligent, but are those who continuously learn and grow.

This approach is exemplified by his forward-thinking investment in BYD, a Chinese electric-vehicle company, demonstrating his knack for staying abreast of global trends.

Munger’s approach highlights that the best investors are those who continuously learn and adjust to the changing world, a principle that remains relevant for future investment success.

4. “The worshipping at the altar of diversification, I think that is really crazy.” / “The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they do not. It is just that simple.”

Buffett and Munger suggest that for most people, wide diversification is sensible, aligning with a low-cost-index-fund approach. However, they believe that if one is skilled in evaluating businesses, diversification becomes unnecessary.

Their philosophy is built on focusing on a few wonderful businesses, stressing that significant wealth is often generated through non-diversification. They argue that understanding a few exceptional companies is better than owning a large, diverse portfolio.

This approach is counter to traditional asset management doctrines but has been key to their success.

5. “I think life is a whole series of opportunity costs. You know, you got to marry the best person who is convenient to find who will have you. Investment is much the same sort of a process.”

Munger compared life to a series of opportunity costs, suggesting that both in life and in investing, decisions are made based on the best options available.

He highlighted this idea in the 1997 Berkshire Hathaway annual meeting, pointing out that just as one might choose a life partner based on the best available option willing to reciprocate, investment decisions are similarly a process of selecting the best available option within one’s reach.

This philosophy underlines the importance of making the most of opportunities that are accessible, rather than striving for unattainable ideals, both in personal life and in financial investments.

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