- Investment titan Munger dies: Warren Buffett’s longtime business partner at Berkshire Hathaway passes away ‘peacefully’ at California hospital
- His financial wisdom is simple, clear and valuable for everyday investors
- But he warns: ‘Life is not just bathing you with unlimited opportunities’
Investment titan Charlie Munger, the longtime business partner of Warren Buffett, died on Tuesday aged 99.
Berkshire Hathaway, the firm which the pair ran, announced he had passed away ‘peacefully’ in a California hospital.
Here are the core tenets of his investment philosophy. Although sometimes deemed contentious, they made him one of the most successful investors in American history.
Earlier this year, he was worth an estimated $2.6 billion, according to Forbes – having earned a large fortune even before he teamed up with Buffett in the 1960s – but most of his financial wisdom is simple, clear and valuable for everyday investors.
Investment titan Charlie Munger (left), the longtime business partner of Warren Buffett (right), died on Tuesday aged 99
Buy and hold
Despite living through multiple evolutions of the stock market and witnessing the increasing popularity of higher frequency trading, Munger was always an ardent believer in long-term investments.
‘The big money is not in the buying and the selling, but in the waiting,’ he famously said.
Good investments are rare
Munger often espoused that good opportunities are rare, saying: ‘Life is not just bathing you with unlimited opportunities.’
In Munger’s view when opportunities come around it’s important to seize them. Quoting his grandfather he said: ‘When you get a lollapalooza, for God’s sake, don’t hang by like a timid little rabbit.’
Despite the widespread attitude that diversification of a portfolio is the key to its strength, Munger had a slightly contrary view about what he described as ‘deworsification’.
The core of his argument is that although diversifying with different investments in multiple assets can mitigate risk and protect against losses, it will also limit the potential for high returns.
As well as thinking about long-term investments, Munger also stressed the importance of keeping an open mind to be successful.
Speaking at Berkshire Hathaway’s annual shareholder meeting in Omaha, Nebraska, alongside Buffett in May, he said: ‘It’s so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, and do a lot of deferred gratification.
‘If you do all those things, you are almost certain to succeed. If you don’t, you’re going to need a lot of luck.’
Put money in tracker funds
Munger has long advocated the fairly simple approach of investing in funds that track the value of popular indexes, like the S&P 500 – which tracks the 500 biggest companies in the US including Apple, Microsoft and Google.
While they may be diversified and generate less eye-catching earnings as a result, these funds continually deliver, often offer lower fees and are an especially useful place to invest retirement savings, he has said.
‘Consistently buy an S&P 500 low-cost index fund,’ he said in 2017. ‘Keep buying it through thick and thin, and especially through thin.’