Charlie Munger (Trades, Portfolio) is the right-hand man of Warren Buffett (Trades, Portfolio) at Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) and an accomplished investor in his own right. Over the years, Munger has issued an enormous amount of advice to investors and anyone else who’s prepared to listen on many different topics.
Investing is Munger and Buffett’s specialty, and they both understand what it takes to succeed in the market. Munger, in particular, has issued many different statements over the years about how important it is to play to your own rules in investing if you want to succeed.
This advice is invaluable because there are thousands of investors out there who have blown it all by trying to be too smart and investing outside their circles of competence. Below are some of Munger’s best quotes on the topic of playing the investing game to your advantage.
"If you think your IQ is 160, but it's 150, you're a disaster. It's much better to have a 130 IQ and think it's 120." – Berkshire Hathaway 2009 meeting
"We recognized early on that very smart people do very dumb things, and we wanted to know why and who so we could avoid them." –Â Berkshire Hathaway 2007
"You'll do better if you have passion for something in which you have aptitude. If Warren had gone into ballet, no one would have heard of him." –Â Berkshire Hathaway 2008 meeting
"Generally speaking, envy, resentment, revenge and self-pity are disastrous modes of thought. Self-pity gets fairly close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity. Self-pity will not improve the situation." – USC Law Commencement Speech
"Another thing that does one in, of course, is the self-serving bias to which we're all subject. You think the 'True Little Me' is entitled to do what it wants to do. And, for instance, why shouldn't the True Little Me overspend my income? There once was a man who became the most famous composer in the world but was utterly miserable most of the time, and one of the reasons was because he always overspent his income. That was Mozart. If Mozart can't get by with this kind of asinine conduct, I don't think you should try." – USC Law Commencement Speech
"It reminds me of the young guy who went up to Mozart and said, 'I'd like to write symphonies.' When Mozart said, 'You're too young,' the young man replied, 'But you were young when you started.' Mozart pointed out, 'Yes, but I wasn't asking anyone else for advice on how to do it.'” – Source: Berkshire Hathaway 2006 meeting
"Well, opportunity cost is a huge filter in life. If you've got two suitors who are eager to have you, but one is way better than the other, you're going to choose that one rather than the other. That's the way we filter stock-buying opportunities. Our ideas are so simple. People keep asking us for mysteries, but all we have are the most elementary ideas." –Â Berkshire Hathaway 1997 meeting
“Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return –Â even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive-looking price, you'll end up with a fine result.” –Â A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business
"Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer."
“Each person has to play the game given his own marginal utility considerations and in a way that takes into account his own psychology. If losses are going to make you miserable – and some losses are inevitable – you might be wise to utilize a very conservative patterns of investment and saving all your life. So you have to adapt your strategy to your own nature and your own talents. I don’t think there’s a one-size-fits-all investment strategy that I can give you.” – The Warren Buffett Portfolio: Mastering the Power of the Focus
Disclosure:Ă‚ Author holds no stocks mentioned.
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