If you didn’t get to know Charlie Munger, then you missed a lot in life. But since history doesn’t forget, especially during this era of technology, you will learn some of the finance principles you can adopt in your life that Charlie Munger used.
Although he died recently, a month shy of 100 years, he left a lot of wisdom and knowledge. Particularly about finance and investments. His views on investing, time, patience, virtue, and hard work offer the very bedrock of financial analysis that should be replicated by nearly everyone.
1.Take a multidisciplinary approach
Charlie Munger is known for a lot of things in did in business. He is accredited in business success in focusing on every big thing. He did not dwell on one side because he knew it. Rather, he could venture anything he thought could work. This principle requires that we channel our energies and resources to diverse areas for us to gain more. The fact that you studied engineering should not make you a prisoner to the profession, instead have broad perspectives.
2.Plan for the worst
To Munger, it’s better to be a pessimist than to plan without expecting wrong things to happen. In some instances, we hear failed strategies and plans by people and organizations. Then what makes you think what you’re planning wouldn’t fail? The fact that there are sufficient facts to support your plan does not mean it will always go as you desire. Odds are high that things will change owing to the ever-changing world. To avoid depression caused by the unexpected, plan and give room for the worst.
3.Pursue quality (and modest)
The pursuit of quality is the pillar of your financial success. Charlie Munger together with his long-term friend Warren Buffet, invested in quality companies to make handsome profits. In the usual endeavors to create wealth, quality enhances your odds of making a breakthrough.
4.Focus on what not to do
Often, we stay so focused on what we do. But that is not for Charlie Munger. He shared his thoughts in his 2007 commencement speech, on what he called “inversion.” In other words: “What will fail in life? What do you want to avoid?” He said he had made many good choices simply by focusing on what not to do. At the time, his examples included avoiding laziness, intense ideology, and perverse associations (including working for people you don’t like or respect.) These views helped him clear his path to success.
When the technological disruptions emerged, Munger had a word. To him, there was no way AI could be a good business. Same for the cryptocurrency. “It’s a hype” Equally, he could not invest in meme stock.
5.Fish where the fish are
Financial success is not a game of trial and error. Charlie Munger advised that you need to go where the opportunities are and where there is demand. In other words, it’s not just about your skills and hard work, but also about the industry you choose to work in. This point nearly marries with that one which requires you to take multidisciplinary approaches.
6.Get Your First $10,00 as Soon as Possible
Achieving the $10,000 mark requires that you change your lifestyle. You can not do what you did to achieve different results. To realize this, you need to invest at least half of your income. This requires serious determination and unwavering determination. To some extent, you need to change your entire routine and adapt to changes. Comfort wouldn’t yield significant results.
7.Own equity
To own equity means to have a share in a company. If you have a chance to have a stake as an employee, then you have an advantage. Grab it. However, invest in other companies that you may not be working it. Some platforms enable you to have equity ownership.
This according to Munger does not give you the benefit of pay but rather the rising value of the business invested.
8.Spend less than you earn
The word “spend less than you earn” may seem like a no-brainer. It’s that simply stated but for many people, it’s a mountain of task. The consumerism economy and culture constantly sway this decision. It’s much easier to be caught up by advertisements, peer pressure, and social competition. The moment you knack this, then you’ve opened the gates of financial success.
These financial principles according to Charlie Munger, builds discipline for you to make a step towards bigger achievements. Each of them, if you customize to suit your situation will yield a result.
