What would Charlie do?

The investing world is suffering from an oversupply of paeans to Charlie Munger, but they are quite justified for once. However, unlike many other rich people who can only be admired, you and I can emulate Munger.

To understand why, carefully read this quote from Munger: It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid instead of trying to be very intelligent. The core of his advice is straightforward: steer clear of foolish actions. Rather, engage in practical, sensible activities and persist with them over many years and decades. He was a proponent of the long game, believing in the cumulative effect of small, sensible decisions made regularly over time. This principle of gradual progress and steady wealth accumulation was pivotal in his investment strategy, mirroring his overall life philosophy. This means that while there are many wealthy and successful people to admire, the nature of Munger's success is such that it can be emulated by anyone, regardless of their financial situation.

However, instead of reading pithy Mungerisms, of which there is a vast supply, let's see what practical lessons we can get from him in specific situations. The following is my list - I don't pretend it's comprehensive or I may not have missed something important - but it's a good starting point. So, an investor influenced by Munger's principles would likely behave in the following ways in various market situations, guided by some of his most famous Mungerisms:

In times of market volatility...: He famously said, "The big money is not in the buying and selling but in the waiting." An investor following this principle would likely remain calm during market volatility, avoiding impulsive decisions. They would focus on the long-term value of their investments rather than reacting to short-term market fluctuations.

Evaluating investment opportunities: Munger advocates for thorough understanding, saying, "I never allow myself to have an opinion on anything that I don't know the other side's argument better than they do." An investor guided by this principle would thoroughly research and understand potential investments, including their risks, benefits, and, most importantly, the viewpoints of sceptics.

During market bubbles or fads: Reflecting his contempt for following the crowd, Munger said, "Remember that reputation and integrity are your most valuable assets — and can be lost in a heartbeat." Investors influenced by Munger would avoid getting swept up in market manias or speculative bubbles. They would focus on investments with solid fundamentals and intrinsic value rather than chasing high-risk, high-reward trends.

In managing portfolio risk: The most appropriate quote is the one I started with. "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid instead of trying to be very intelligent." Such an investor would prefer a portfolio of high-quality, understandable investments over a complex or overly diversified portfolio. They would focus on avoiding significant mistakes rather than seeking extraordinary returns.

While dealing with investment losses: Munger is known for his resilience and long-term perspective. He advises, "All I want to know is where I'm going to die, so I'll never go there." This metaphor suggests that investors should learn from their mistakes and avoid repeating them rather than dwelling on the losses.

Continuous learning: Munger places a high value on constant learning, as indicated by his quote, "I am a biography nut myself. And I think when you're trying to teach the great concepts that work, it helps to tie them to the lives and personalities of the people who developed them. I think that's an underutilised teaching device." An investor influenced by Munger would, therefore, be committed to ongoing education, learning from the successes and failures of others, and continually refining their investment approach.

Admitting mistakes: Arguably, the most important one, "I like people admitting they were complete stupid horses' asses. I know I'll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn."

Of course, there are many more, and if you start reading up on Munger, you'll probably replace this list with your favourites - that's something Charlie would appreciate.

Also read: An extraordinary, ordinary man