Charlie Munger’s 10 Rules of Investing

Charlie Munger is mostly known as Warren Buffett’s number 2 and as the Vice Chairman of Berkshire. He made the call to go ahead with Coca Cola, Bank of America and Apple and his calls have made Berkshire some serious gains over the years.

In this article I will recap the top 10 investment strategies Munger has implemented during his years of investing, hoping we can all learn from it going forward.

The first rule is to focus high-quality businesses: invest in businesses that have a strong competitive advantage, a durable economic moat, and a solid management team.

The second rule is even simpler, focus of easy to understand businesses: Avoid businesses that are overly complex or difficult to understand. Maybe that explains why never invested in Palantir ;)

The next rule is to look for a mispriced company: Try to not only find a good businesses but also ones are that are undervalued by the market for some reason and have the potential to generate strong returns over the long term.

The next rule is being very patient: Don't try to time the market or chase short-term trends. Instead, focus on finding good businesses and holding onto them for the long term.

You heard this one many times before. Don't put all your eggs in one basket. Have a range of assets to reduce risk in a smart way.

Keep your emotions in check is another key rule: Don't let your emotions cloud your judgment. Don’t fall in love with stocks. Stay calm and avoid making rash decisions based on fear or greed. Don’t panic sell and don’t FOMO buy anything.

Try and improve by learning from your mistakes: Don't be afraid to admit when you've made a mistake and learn from it. If you had a bad investment try to understand what made you make that mistake and how to avoid it in the future.

Don't overpay is a key Minger principle: Make sure you're getting a good value for your investments. You don’t want to be paying too much for a business or its assets even if it’s a great company. Think about it as the love the company hate stock rule.

Aloow yourself to consider a wide range of investment opportunities and don't be afraid to challenge your own assumptions even if you are sure they are solid. Challenge yourself by playing devils advocate as much as possible.

Know the macro and gel political climate: Stay up to date on market developments, politics, economic issues and continue to learn and improve your investing skills every day.