Slideshows | March 27, 2018

Words from the wise – five investing quotes from Charlie Munger

For on-the-money tips from Buffett’s right-hand man, try a Mungerism.

“Manage affairs before they’re in a mess.” This quote from Lao Tzu, reputed author of the Tao Te Ching, might easily have come from investor Charlie Munger. It is replete with the kind of blunt common sense that’s so easy to overlook – just like one of Charlie’s oft-reported “Mungerisms”.

Munger has stayed further out of the limelight than his more famous Berkshire Hathaway business partner, billionaire Warren Buffett, the US investment firm they've steered successfully for decades.

Like Buffett, though, Munger has many wise sayings about investing. If the average investor could sit down next to Charlie and ask him in person for some financial tips, what might he say?

In good company
We think Munger might maintain, for instance, that people should do their own reading and research – and draw their own conclusions – before buying shares or otherwise investing, instead of simply following the herd.

Like Buffett, Munger places a premium on knowing who is involved in a project when it comes to investing. Do the folk involved in an investment have the right skills and experience? And if those in the lead have little to lose, they may expend less effort on ensuring success.

Here are five of our favourite quotes from Charlie Munger over the years.

Do you agree with our choices and do you follow his lead? Let us know at www.ezonomics.com/contactus or @ezonomics.

 

1

Cliff jumpers Herd thinking, says Munger, tends to average out performance. An opinion may be wrong even if it’s widely held.

2

Arch enemy This is rather like “packing your own parachute”, Munger notes. Similarly, choose investments backed by people who have a genuine stake in the success of the operation.

3

Alternative options Thinking traps such as availability bias skew human decisions – and Munger knows it. Protect yourself by exploring further before making a choice, and keep learning.

4

Riding too rough? Benefits from investing in a project or business should be clear and easy to understand, Munger suggests. If they’re not, move on.

5

Break through view When making decisions, consider arguments from all sides. Munger says you must be ready to ditch sunk costs and change your beliefs.

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eZonomics team
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