How to Invest Like Charlie Munger: Learn from the Best with New Gen

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Charlie Munger, Investment geniuses / 1 March, 2022

Karla García Gil Journalist

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At New Gen we have been talking for some time about the importance of seeking defensive strategies that protect investors’ portfolios, especially in recent times when most stock markets have fallen into negative territory. In this sense, value investing is one that has been chosen by geniuses of the stature of Charlie Munger, whose fortune amounts to 2.5 billion dollars.

The American investor, born in 1924, is vice chairman of Berkshire Hathaway, a multinational conglomerate chaired by Warren Buffett.  He is also chairman of the Daily Journal Corporation, of Los Angeles, California, and one of the directors of Costco Wholesale Corporation.

Charlie Munger's biography: What is his investment style?

Charlie Munger's biography: What is his investment style?

Although a bit behind the scenes, Charlie Munger is not exactly an unknown, in fact, it is thanks to his advice and vision on "value investing", that Warren Buffett changed his methodology for selecting stocks, a method without which Berkshire Hathaway would hardly be what it is today.

Warren Buffett, Munger’s partner and friend, has 119.9 billion dollars and is another person who bets on this investment method. Both are known precisely for being two of the great value investors of our era. Value investing is a strategy that seeks stocks that are undervalued in the market or that are sold for a price below their fair or intrinsic value.

Although Munger is best known for his association with Buffett, he himself created an investment company, which generated compounded annual returns of 19.8% during the period 1962 to 1975.

Munger was also chairman of Wesco Financial Corporation, now a subsidiary of Berkshire Hathaway, which grew to control major firms. Wesco Financial managed stakes in excess of $1.5 billion in companies such as Coca-Cola, Wells Fargo, Procter & Gamble, Kraft Foods, US. Bancorp, and Goldman Sachs.

Elementary worldly wisdom

Munger has his own investment pitch, which he has dubbed “elementary worldly wisdom,” a reference to controlling emotions and a set of mental models that encompasses disciplines such as economics, psychology and ethics. The idea is to keep your feelings away from investments and thus avoid making bad decisions.

His investment strategy is based on repeating what works. For Munger, it is better to analyze few assets thoroughly and to be patient when investing in them. He has repeatedly said that he finds it easier to focus on five assets where he has a high probability of getting it right than on a hundred.

“It’s absolutely crazy to think that owning 100 stocks instead of five makes you a better investor.” “The big money is not in buying or selling, but in waiting,” are just a few of his signature phrases.

The book Charlie Munger: The Complete Investor, written by Tren Griffin, a senior Microsoft executive and member of the board of directors of Kymeta, a communications company, explains the essential steps of value investing based on interviews, speeches, writings, and seasoned with comments from fund managers and investors.

One of the keys that have accompanied Munger throughout his career is reading, since in his opinion there is not a single wise person who does not always read.

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