Charlie Munger Quotes - Investing Lessons to Heed!

Wall Street tends to throw around the phrase “legendary investor” a bit too much. Making one good “prediction” isn’t legendary. Hedge fund managers who “outperformed” before the days of the internet--when information was not disseminated as quickly—were provided a huge advantage over those without “real-time” access to that information; not legendary, in our opinion.

Today, everyone has access to the same information instantaneously, and it’s a much more competitive game. However, compounding very solid returns over multiple decades with a very easy to understand philosophy and strategy IS legendary!  Charlie Munger and Warren Buffett ARE legendary. Sadly, Munger (Buffett’s long-time partner in Berkshire Hathaway) passed away last week at 99 years old, just a month before his 100th birthday.

Munger was well-known for his “Mungerism’s”---those quick one liners with so much meaning behind them. In a tribute to him, we share our top 10 “Mungerism’s” and what we can learn from them. 

1. “I did not intend to get rich. I wanted to become independent. I just overshot.” Two Takeaways from this:  First, of course, is our simple mission for each of our clients; that is, to help them achieve financial independence just like Munger noted….To be financially independent, not necessarily rich. And if you focus more on the financial independence, you’ll probably achieve more wealth in the process!  Second, for us, independence in our careers is perhaps just as important. Running our business independently and serving the types of families who believe in our philosophy are incredibly rewarding. Not having our advice directed or influenced by some larger parent-entity with possibly conflicting objectives is of paramount importance to NCM. Only a truly independent firm can stand behind such a statement. 

2. “Show me the incentive and I will show you the outcome.” Munger was certainly no fan with much of how Wall Street works. Similarly, just tell us what kind of firm someone represents and without even hearing the advice, we likely can tell you what it is ahead of time. (Try this game sometime….It is fun!) 

3. “If you can’t stomach 50% declines in your investment, you will get the mediocre returns you deserve.” Ok, a little harsh from Charlie! But a valid point. Investors always think it’s easy to own Nvidia, Apple, Microsoft etc., but do you know how many times these big winners decline 50% or more at some point? Many. Can you hold on through such a big decline?  

4. “The big money is not in the buying and selling, but in the waiting.” Munger would not be a favored client of Wall Street! His holding period? Almost forever. There is no need to be constantly trading or switching investment strategies. But for much of Wall Street, this “buy and hold” approach means fewer opportunities for fees and commissions…Clearly, a strategy that is rarely promoted by most large firms! 

5. “We have three baskets for investing; yes, no, and too tough to understand.”  Munger always preached to understand one’s own skillset. There are too many investments that are too complicated to understand. Investors should note that a “complicated” investment does not necessarily always equate to a “successful” investment. If you need a PhD to understand a particular investment, it may be best to move on; there are plenty of other effective alternatives.  

6. “It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” Munger makes a good point.  Just avoiding making silly mistakes is often crucial to long-term success.  But this may be hard to quantify for most. Instead, too many investors focus more on things that are not nearly as important, such as “Did I beat the market last quarter?” or “My friend says he got rich on this stock.”  

7. “Everywhere there is a large commission, there is a high probability of a rip-off.” We’ve said it a million times: In today’s market, anyone can buy great investments with no initial fee and very low ongoing costs; there is no better time to be an individual investor. Why in the world would you put yourself in an unnecessary disadvantage by buying something with a high initial fee?  

8. “The first rule of compounding: Never interrupt it unnecessarily.” Patience, Patience, Patience…..The key to investment success. Munger and Buffett are masterful at ignoring the short-term noise in the investment markets.  

9. “It takes character to sit with all that cash and to do nothing. I didn’t get to the top where I am by going after mediocre opportunities.” This is another reason why individual investors have an advantage over Wall Street. No pressure to invest excess cash! Munger and Buffett sit on a lot of cash waiting for their pitch. They are not worried about beating the S&P 500 every quarter!  

10. “There are three ways to go broke: liquor, ladies, and leverage.” No comment from us on the first two, BUT do not invest in anything that uses leverage! Leverage can feel good when times are good, but it can be devastating when things turn down. 

In summary, there is so much we can learn from Munger. Not just with investing, but life lessons as well. There are lists circulating online of his top 99 quotes. Have your kids and/or grandkids read them….We promise they will be worth the time. 

RIP Charlie and thank you for your wisdom. 

NCM Capital Management

Disclosures: This is not an offer or solicitation for the purchase or sale of any security or asset. While the information presented herein is believed to be reliable, no representation or warranty is made concerning its accuracy. The views expressed are those of NCM Capital Management, LLC and are subject to change at any time based on market and other conditions and NCM does not undertake to update or supplement its newsletter or any of the information contained therein. Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable. There is no guarantee that the investment strategies discussed above will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Investment advisory services are offered through NCM Capital Management, LLC, an SEC-registered wealth advisory firm domiciled in New Jersey. This communication is not to be construed or interpreted as a solicitation or offer to sell investment advisory services.  For additional information about NCM Capital Management, LLC, you may request a copy of our disclosure statement as set forth on Form ADV. Readers are encouraged to consult with their own professional advisers, including investment advisers and tax/legal advisors. NCM Capital Management, LLC does not provide legal or tax advice. NCM Capital Management, LLC can assist in determining a suitable investing approach for individuals, which may or may not resemble the strategies outlined herein.