Investment wisdom of Charlie Munger: Strategies for Long-Term Success

December 2023

“The big money is not in the buying and the selling; it’s in the waiting.” 

- Charlie Munger

Charlie Munger was a capitalist. Making money was important to him and by his own scorecard he was undoubtedly had alot of investment wisdom.

He is said to have amassed a fortune of more than $2.5 billion dollars, just by investing.  Fortunately for us, the late vice president of Berkshire Hathaway was feeling generous in sharing his formula for success. Here are the highlights.

Take a long-term view 

Charlie Munger died at the end of November 2023, just one month shy of his 100th birthday. With that sort of longevity, you can afford to be patient and wait for the opportunities to present themselves. 

Patience was the foundational virtue of Munger’s investment strategy.  Patience in identifying opportunities worthy of investment, and patience in waiting for the investment to pay off.

 Spend less than you earn and invest.

It sounds obvious, but not many people do it. Generally, even if people can live within their means, they still forget the last part of the formula; to invest the remainder.  And even if they do, they will eventually spend their savings on major planned lifestyle purchases like an overseas holiday or a new car. 

He was well known for his funny truthful humor when it came to investing. He had seen it all and been successful at it. But Charlie Munger was different.  He invested with the intention of building a nest egg, investing small amounts regularly and leaving it to compound over the long run. 

One decision; Growth Stocks.

Charlie Munger changed the entire way Berkshire Hathaway invests.  Warren Buffett was a student of Benjamin Graham; the father of value investing.  Accordingly, Buffet was only interested in buying companies cheap; generally distressed assets experiencing some sort of crisis. 

Charlie Munger broadened the opportunity set to include quality companies at fair prices; companies with good reputations and sound income and growth outlooks. The purchase price still matters, but when you’re buying to hold over the long run, it is just important that you don’t overpay.

Behaviour Gap

It all sounds sensible enough, so why is it so few people achieve financial independence?  

Put simply, it can be explained by what Carl Richards calls the ‘behaviour gap’.  It’s the difference between the outcomes we theoretically could achieve and what we actually achieve in the real world.  Changing behaviour is hard, and when it comes to investing, we all do things that we shouldn’t, and we don’t do things we should.

We are Independent Financial Planners. At Finspire Advisers, we provide goal driven, holistic financial planning to everyday Australians. No Commissions. No Hidden Fees. No Pressure. We will help you minimise the “behaviour gap”.  Book a complimentary appointment now.

Rest in Peace Charlie Munger, whom passed away 28th of November 2023.

This article is general and does not consider your personal financial circumstances so it may not be appropriate to you.  If you would like advice specific to you, please let us know.