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Rupert Hargreaves
Rupert Hargreaves
Articles (1195)  | Author's Website |

Warren Buffett and Charlie Munger on How to Be a Good Investor

Thoughts from the 2004 Berkshire Hathaway annual meeting

May 21, 2020 | About:

Reading is by far the best way to improve your knowledge and understanding of the world. This is particularly true for investors.

Reading about the world of investment and business managers helps you understand how to succeed in business. After all, the best way to learn is to learn from others who have been successful in a particular field.

Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) have always praised the benefits of regular reading. Both of these billionaires read continuously on many different subjects, as they continually try to update and improve their knowledge and understanding of the world.

Even these investors, who are considered to be some of the greatest of all time, have to practice and update their understanding of the world. But how did they get started? Where did they start learning about investing and money? One shareholder wanted to know the answer to this question at the 2004 Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) annual meeting of shareholders.

Buffett started his answer by explaining that when he first started investing, he learned a tremendous amount by just studying businesses:

"We would look at everything in sight that we thought we could understand. And it — the world hasn't changed in that respect. There may be some more people doing it, but there are a lot more companies to look at now. And we would — we would read everything in sight about the businesses and the industries we thought we could understand. We would look for things that jumped out at us as being very cheap in relation to the value. And we would have one enormous advantage because we would be working with far less capital, which means the universe of potential ideas would be far greater."

The Oracle of Omaha went on to add that the world has not changed in this respect, and that investors could still learn a lot by following the same process.

Munger took over at this point and went on to add that reading is a vitally important part of learning, but he also said that reading "alone won't do it." He went on to declare that to be a successful investor, you need to have "a temperament" that lends itself to an understanding of finance and investing. If you don't have the right temperament, you could be overwhelmed by a mass of material on the subject, Munger said.

Buffett went on to add:

"I mean, if you can't control yourself, no matter what the intellect you bring to the process, you know, you're going to have disasters. And Charlie and have seen one after another that — It's not a business that requires extraordinary intellect. It does require extraordinary discipline. That shouldn't be so difficult. But as I look around the world sometimes, apparently it is quite difficult. I mean, the whole world went a little mad a few years back in terms of investments. And you say to yourself, "How could that happen? Don't they learn anything for the earlier ones?" But, you know, what we learn from history is that people don't learn from history. And you certainly see that in financial markets all the time."

All in all, it is not enough to just simply read about how to be a good investor. It requires patience, a good understanding of the financial world and the right temperament. No amount of reading and learning will replace patience and attitude.

Disclosure: The author owns shares in Berkshire Hathaway.

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About the author:

Rupert Hargreaves
Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors.

Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.

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