The world has lost one of the world's greatest investment minds with the sad passing of Berkshire Hathaway's Charlie Munger. He may not be physically with us, but Munger has imparted so much wisdom that his impact will be felt on my ASX investment portfolio for the rest of my life.
Charlie Munger was best known as one of the key figures of the US giant Berkshire Hathaway. Warren Buffett, Munger's business partner and Berkshire Hathaway's CEO, said:
Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom and participation.
Munger and Buffett helped Berkshire Hathaway become a business that is getting close to a market capitalisation of US$1 trillion. Buffett credits Munger with helping him become a better investor. I'm going to outline how he helped me become a wealthier ASX investor.
Focus on long-term compounders
Investors have all sorts of investment timeframes, some focus on a multi-year timeline while others may only be looking a few months ahead, or even days.
One of the most helpful and succinct things that Charlie Munger ever said was this:
The big money is not in the buying and the selling but in the waiting.
The more time we give a good business to grow and compound, the more likely it is to be a successful business. He also once said:
The first rule of compounding: Never interrupt it unnecessarily.
Hang onto those good businesses for as long as they have a good future.
Munger and Buffett focused on businesses that they could understand and had "characteristics that give it a durable competitive advantage". But remember that no business or ASX share is worth an "infinite amount", so the price has to make sense, no matter how wonderful the company is.
A voice of calm
There are numerous things I've read, watched and listened Charlie Munger say over the years. I'd encourage anyone interested to go back and listen to all of the Berkshire Hathaway AGMs on YouTube (which go back to at least the 1990s), such as the 2009 one during the GFC.
He was known for the effective, and sometimes blunt, points that he makes. For example, he once said to the BBC:
You can argue that if you're not willing to react with equanimity to a market price decline of 50% two or three times a century you're not fit to be a common shareholder and you deserve the mediocre result you're going to get compared to the people who do have the temperament of people who can be more philosophical about these market fluctuations.
I think that's an important aspect of why Buffett, Munger and Berkshire Hathaway (as a whole) have done so well over the decades. They stayed calm during times of great market fear and picked up numerous great opportunities that helped accelerate wealth-building.
It's taking this attitude that has allowed me to be brave and invest heavily during the COVID-19 crash and during 2022 – investing heavily at these points has given my portfolio some of the strongest returns.
How to live a happy life
I am a better, wealthier ASX investor because of my connection with my family. It has helped me focus on investments that will endure because, ideally, I want my relationships to last forever as well.
However, wealth is not just about money. What's the point of having all the money in the world if you don't have any fulfilling relationships with family or friends? Wealth can also mean having connections, having time and being happy.
I'll finish with two quotes that Charlie Munger has said about life which I think are inspirational.
My family gave me a good education and a marvellous example of how people should behave, and in the end that was more valuable than money. Being surrounded by the right values from the beginning is an immense treasure.
In an interview with CNBC, he answered a question on how to live a long and happy life, which he said was easy and simple:
You don't have a lot of envy, you don't have a lot of resentment, you don't overspend your income, you stay cheerful in spite of your troubles. You deal with reliable people and you do what you're supposed to do. And all these simple rules work so well to make your life better. And they're so trite.
And staying cheerful … because it's a wise thing to do. Is that so hard? And can you be cheerful when you're absolutely mired in deep hatred and resentment? Of course you can't. So why would you take it on?