Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) are considered to be some of the best investors of all time, but what are their most attractive qualities? Why have these two individuals achieved such fantastic returns and accumulated a tremendous amount of wealth in the stock market when so many other people have failed?
The keys to success
There is no one answer to this question. Some people might argue their investment skill has helped them get to where they are today. And that is true, to a certain extent. Both of these investors are incredibly skilled at picking the right stocks to buy and hold for the long-term.
However, that is only part of the story. Many successful stock pickers have been around for decades, but none of them have built the sort of fortunes and business empire as Buffett and Munger.
Another quality that has helped these two investors get to where they are today is longevity. Both have been active stock market participants for decades. Buffett started investing when he was in his teens. According to Buffett, thanks to the power of compound interest, even average investors can make a fortune as long as they live a long time.
The Oracle of Omaha accumulated the majority of his wealth after his 60th birthday. If he had passed away before his 60th birthday, it's unlikely his reputation would be as formidable as it is today. Thus, a third factor is luck. Buffett and Munger have both been lucky with their long lifespans, and they were lucky to meet each other when they did.
Additionally, if Buffett hadn't had studied under Benjamin Graham, and if Munger had refused to meet with Buffett or get into the investment business himself, there's a good chance neither of these investors would be where they are today.
The above are factors we cannot control, but there is another factor that has helped shape these two investors' careers which we can all implement in our own lives: the right temperament.
The right temperament
Buffett and Munger's temperament is vastly underappreciated, in my opinion. They are both remarkably patient and have a keen interest in business. They are also extremely interested in learning new things, and never act on impulse.
These qualities have helped both investors avoid making significant mistakes driven by knee-jerk reactions. They take a long-term view when analyzing investments, and indeed, their lives.
They are not willing to rush into anything just for the sake of it. They are also focused on doing what they do best well. Buffett and Munger know where their strengths are, and they have never tried to take on more than they understand.
Investors can't control how long we can live. Nor can we control our own luck. Research shows that most investors are terrible at picking individual stocks. However, we can try and gain control over how we act in stressful situations, how we act when we meet people and how we live our lives. These little changes can help improve our investment performance.
Establishing how to learn from mistakes and move on from mistakes without letting them take over your way of thinking is essential.
At the same time, it is important to prevent emotion from taking control of your actions. Reason and logic is the best way to solve problems. That's something Buffett and Munger have realized that is easy to copy.
These two billionaires are also avid readers. They are always looking for new ideas or thoughts on different topics. This constant desire to learn means they are always moving forward. This is something else the average investor can replicate.
What's more, they always invest with a long-term mentality. This can be difficult to implement initially, but the long-term potential of doing so is clearly worth it.
All in all, we can't control our luck, but we can make some of our own luck by copying the habits of successful people.
Disclosure: The author owns shares in Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial).
Read more here:
- Warren Buffett: Most Investors Will Do Well Without Borrowing Money
- Some Thoughts on How to Invest in the Current Market
- Why Warren Buffett's Japan Bet Is a Great Deal for Berkshire's Investors
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