5 Important Investing Lessons From Charlie Munger | Motilal Oswal
5 Important Investing Lessons From Charlie Munger | Motilal Oswal

5 Investing Lessons from Charlie Munger That Will Change The Way You Think

Amidst a war, death and destruction was an officer. A 19-year-old college dropout, who had not planned his life beyond time. Days passed, the war stopped and so came a question in his mind - “What’s next?”. After serving in the U.S. Army Air Corps, for approximately three years, Charlie was out with no job and no degree to support his wife and three children! Unusual to the conventional ideas of education, Charlie enrolled for advanced graduate courses in Caltech, skipping to complete his undergraduate degree. Further, he used his undergraduate course skills and got admitted into the Harvard Law School, where he graduated ‘Magna cum Laude’ (top distinction). Revisiting his days in the army, Charlie recalled when he used to play cards, sitting alongside the bonfire, giggling. His knowledge in the game of cards was unbeatable, which motivated him to walk towards a larger game of life - The Stock Market.

At 29, Charlie had still not established his name, neither was he in a state of total control. As the days passed, his life put forth more challenges for him. Nancy, with whom Charlie had grown his family, was now planning to part ways. Disheartened and broken, the divorce ended in Charlie’s near bankruptcy. But what Charlie had in his mind was a persistent belief in survival without complaints.

Out of job, divorced, losing his own son at the mere age of 9, he endured every challenge. He walked past the days - where he would self-pity on his conditions, and stood firmly with a belief of ‘Newer, Better Tomorrow’. And he was right…

Charlie, after a hideous roadblock, steadily grew to become a stable man. He remarried in 1956 with Nancy Borthwick, and became the head of a family serving 8 children! These days, Charlie tried his hands at many businesses such as establishing an investment hedge fund business, a real estate law firm, being an investment advisor, and so on. But things changed in 1956 when Charlie shook hands with his future business partner - Warren Buffett. His value investing formula changed the course of time and established Berkshire Hathaway as the most valued company to invest in, thanks to Buffett and Munger’s honest business ethics and principles. By the time Munger turned 50, he was already a millionaire. At 97 today, Munger’s net worth is close to $ 2.2 Billion. His life is the same as any American Movie Drama. An honest man working hard, fighting odd challenges of life to become the Man he always dreamt to be! But was it just the dream that helped Munger achieve this success? No...it was his principles, persistence, confidence and the strength to become a man from a no man.

This takes us to learn the most profitable lessons of life -

  • Being persistent - Charlie Munger’s investment strategy says to be persistent on one's goal. Whatever be the challenge, an individual shall always face it as an experience to learn from and to become better with. Challenging times do not challenge the ability, it challenges the personality - whether a winner or loser. And in the stock market, there is only one personality that wins - it is a winning personality!
     
  • Being honest - According to Munger, no individual can achieve success without being honest. Be it in business or in life, an individual has to be honest with his opinions, choices, customers and partners in all given situations. And in the stock market, honesty holds value. If an individual invests in an honest company, it is guaranteed that the returns will be favourable. If the company isn’t honest with its investors, pay-offs will be manipulative.
     
  • Being vivacious - One thing that Charlie Munger hates the most is self-pity. Given the situation he was struggling in, Munger could have easily switched to alcohol or drugs to spare himself apart from his struggles. But he didn’t. It was not because he did not have money, but because he did not have a will to fall for self-pity. One of Munger’s greatest quotes says, “If anyone can help you through your difficult times…it’s you”. Self-pity asks for empathy from people. Self-pity asks for attention from people. But what it does is bends an individual to its worst level. Applying the same in equity trading, all traders and investors must look at the brighter side than pity the situation. It was the money that you invested. If you are profitable, you celebrate. If you are not profitable, you move ahead. Hanging on the edge of a chance doesn’t really provide a solution.
     
  • Being disciplined - Honesty, discipline, and ethics make the three pillars of investment principles by Charlie Munger. One who follows an honest and disciplined routine in an ethical manner of business will definitely empower a huge amount of wealth in any terms - money, knowledge, structure, etc. This is why an individual whether a trader or an investor has to discipline himself/herself in a manner that shall provide abundant peace despite odd and off conditions in the stock market.
     
  • Learn to unlearn - One of the most important reasons why Munger stresses making reading a habit is because each book helps an individual understand old things in a new way. According to Munger, there are innumerable solutions to a problem, and to see through each of the solutions, an individual should first unlearn all the things that s/he has learnt from his/her previous experiences. In the same way, while drafting an investment strategy, an individual will have to draft a new strategy for every new investment that he/she plans to do.

In Charlie Munger’s words - “Always take the high road, it’s far less crowded!”. In an era, where individuals are hunting for discounts and offers on everything, what they skip to see is the experience and expertise that one brings to the table. At Motilal Oswal, we bring to you offers, discounts with qualified experience and expertise. Begin your investment journey with Motilal Oswal.

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