Charlie Munger's greatest bits of investing advice from over the years
Charlie Munger, Warren Buffett's righthand man for nearly six decades, was a shrewd investment genius in his own right, passing on rich investing wisdom for generations of investors to learn from.
Buffett, who studied under fabled father of value investing Benjamin Graham at Columbia University after World War II, developed an extraordinary knack for picking cheap stocks. However, it was Munger who broadened his approach to focus on quality companies, enabling Berkshire Hathaway to grow into an insurance, railroad and consumer goods conglomerate.
One of the best examples was Berkshire's acquisition of See's Candies in 1972 under Munger's influence, at a price way higher than Buffett was comfortable at paying for businesses.
«It's not that much fun to buy a business where you really hope this sucker liquidates before it goes broke,» Munger said in 1998.
Unlike the investing philosophy in most textbooks, Munger didn't believe in diversification, or mixing a wide variety of investments within a portfolio, to lower risk. In fact, the Berkshire vice chairman called it «insane» to teach that one has to diversify when investing in common stocks.
«One of the inane things that's taught in modern university education is that a vast diversification is absolutely mandatory in investing in common stocks ...That is an insane idea,» Munger said in Berkshire's meeting this year.
«It's not that easy to have a vast plethora of good opportunities that are easily identified. And if you've only got three, I'd rather be in my best ideas instead of my worst,» Munger said.
Much like Buffett's theory about the «circle of competence,» Munger believed that savvy investors should focus on areas within their expertise and strength in order to avoid
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