thought this might be of interest to some as the holidays draw to a close...
he world lost an investment legend overnight - Charles “Charlie” Munger, the long-time right-hand man of Warren Buffett and the Vice-Chairman of Berkshire Hathaway.
Berkshire Hathawayhas returned 19.8% paon average since 1965, compared to 9.9% for the S&P 500. Munger played no small role in that, joining the firm in the mid-1970s. No one could put it better than Buffett, who said in apress release:
While understated in his approach, investors would be wise to take note of Munger’s insights on investing (and life). After all, alongside his success with Berkshire Hathaway, his net worth was tipped at $2.7 billion. In his honour, I’ve selected five of his best investment insights.
Charlie Munger, Berkshire Hathaway©Provided by Livewire Markets
1) Think long term
This is that story we’ve all heard of the investor who picked a quality company up years ago, sat on it and now it’s highly valuable – the buy and hold approach.
For example, Apple (NASDAQ: AAPL), one of Berkshire Hathaway’s biggest holdings is now valued at US$190.40 a share. In November 2013, it was worth US$19.86. Even if prices fell tomorrow, you’d still have gained by having held it – both in capital value but also from dividends over that period. Or locally,CSL (ASX: CSL)which is today valued at $256.88/share but 10 years ago was $67.30/share – and has consistently paid dividends in that time.
2) Ignore the noise, focus on the fundamentals
Ignore the volatility. A quality well-managed company will still be that even as the market peaks and troughs. A bad day in the markets is not necessarily a sign that you should sell a company if the underlying proposition still stacks up.
3) Keep learning and keep trying your best
Taking a careful measured approach where you keep seeking out new information and adjusting your portfolio as you need will stand you well in investing, as with life.
4) You don’t need to ‘outsmart’ the market, just avoid investing traps
Just following the basics, and investing in tried and true companies can be enough rather than trying to pick tomorrow’s winners or using sophisticated techniques – particularly those you aren’t comfortable with and know inside out. For instance, taking out a short on a hot tip might blow up in your face.
5) Know your limitations and seek help when you need it
If a sector, company or type of asset is not your area of expertise, go and find an expert to help you understand it and evaluate it before investing. Likewise, if investing itself is a challenge, there is no shame in outsourcing to the experts – just make sure you understand what you are paying for.
Finally, it’s worth leaving these pieces of advice that apply to life.
Vale Charles Munger.
(20min delay)
