Charlie Munger: A Replica of Warren Buffett

LEARN FROM GENERALS OF THE MARKETS - PART 40

“True success is the only thing that you cannot have unless and until you have offered it to others.”

Charles Thomas Munger was delivered as a baby boy on January 1, 1924, in Omaha, Nebraska, USA (Warren Buffet is also a native of Omaha). He’s a lawyer, business mogul, Philanthropist and investor. He studied math at the University of Michigan and served in the U.S. Army Air Corps. Then he was admitted to study law at Harvard.  In 1948, he settled in California and started practicing law. In 1962, he worked as a real estate lawyer. Later, he stopped practicing law and focused on investment management. As a result of this, he collaborated with Otis Booth and later, Jack Wheeler, to found Wheeler, Munger, & Co. It was an investment company which had a seat on the Pacific Coast Stock Exchange. From 1962 to 1975, the partnership made compound annual profits of roughly 20%.  After about 31 per cent of losses in 1976, the company was folded up.

Charles is best known for his work with Buffett (the latter calls him his partner).  He formerly chaired Wesco Financial Corporation, which is now part of Berkshire Hathaway. At the time of writing this article, Charles is Vice-chairman of Berkshire Hathaway Corporation. He’s also the chairman of the Daily Journal Corporation. His net worth is $1.1 billion. As a philanthropist, he’s donated hundreds of millions of dollars to schools (including universities). He’s been married twice, having 6 children altogether.

Lessons

These are some of what you can learn from Charles:

1. His investment partnership made some compounded annual profits of roughly 20% between 1962 and 1975. When there were losses of up to 31% in the year 1976, the partnership was ended. Nevertheless, he didn’t quit the investment world (contrary to what most people do today whenever there’s a significant negativity in their investment, without thinking of the days when things were going their way). He simply moved ahead in another format and has been astoundingly successful since then.

2. Do you work with someone who differs from you in certain ways? Your differences shouldn’t cause a rift. Instead, you should focus on your partner’s admirable qualities. In spite of political, operational and interest differences, Charles has been working wonderfully together with Warren Buffett.

3. Charles donated millions of dollars to education. He still donates more and more money. Some might be concerned about his net worth being drastically reduced, but he said he’ll not need the money where he’s going. He’s now close to 90 years of age: Do you think he’ll need the money in his grave? Even if he was the richest man in the world, would that matter to him in his grave?

4. According to Charles, a number of selected stocks that have been studied and mastered can generate excellent profits in the long run. A good trading strategy can give you average profits that are much bigger than average losses over time.

5. People perform well when they’re encouraged and motivated. In a workplace, high ethical standards are needed. Charles once said that good businesses are those with ethics. No business can thrive long on trickery and shenanigans.

6. The more you stay in trading, the more expertise you gain. More years means more wisdom. Besides, for you to master a broad subject matter area, you need to read all time. For you to master the art of trading, you need to read more and more about it.

7. A simple idea can be all you need to get your long-awaited breakthrough. Simple strategy ideas can be all you need to become a permanently successful trader. Take simple ideas seriously. Charles said that it never ceases to amaze him how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles.

8. For you to succeed in trading you don’t have to be brilliant: you just need to be a little wiser than other traders, on average, for a long period of time.

9. Teaching people to master what they don’t know initially is a great thing. Being an effective trading coach is a great calling.

10. Charles says he tries to get rid of people who always confidently answer questions about which they don’t have any real knowledge.

Conclusion: Actually, judge the current level of your expertise in trading. Would you hire someone to manage your money if he’d acquired only the level of your expertise? Would you recommend such one to trade for an investment bank? I know you’d not do that, for it would end up ruining a big amount of portfolio. Doesn’t that then show a need for you to obtain more knowledge?  You think you’re a smart trader, but you still exhibit some rookie’s reactions when it comes to the outcome of your trades. You’d need to know the type of trader you’re so that you can learn a lot from what happens to you. Oftentimes, you simply need to go thru some trying, harrowing and disturbing experiences before you can attain your goal of trading mastery. This is what has happened to many who have mastered the markets.

This article is concluded with a quote from Charles:

“All intelligent investing is value investing — acquiring more than you are paying for… You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”

Azeez Mustapha

Market Analyst, Trading Signals Provider and Coach

Eye-opening trading lessons: Lessons from Expert Traders

Source: http://uk.advfn.com/newspaper/authors/azeez-mustapha