With Hurricane Harvey devastating large portions of Texas and tensions between the U.S. and North Korea heating up once again, it has already been a difficult week for many people across the country. Because of this, our latest edition of Wednesday Wisdom will focus on the words an investor known for his wisdom, patience, and level-headedness: Charlie Munger.
While Munger is less outspoken than his longtime business partner Warren Buffett, his approach to value investing is just as important to remember. The vice chairman of Berkshire Hathaway (BRK.B - Free Report) is well known for his ability to eliminate biases from his investing decisions, and what’s more, Munger has always been public about his belief in companies that are ethical.
Like Buffett, Munger has emerged as one of the most successful value investors of all time. His first job was at a grocery store owned by Warren Buffett’s grandfather, but he quickly worked his way up through the business world and is now worth more than $1.5 billion.
With a fortune like this, it’s obvious that Munger has figured something out, so this week’s Wednesday Wisdom will take a look at a few of his most iconic quotes to see if we can learn something useful about the practice of investing.
We don’t talk about this often enough, but our individual personalities can be one of the biggest challenges to overcome in the investing world. While Munger has made the observation that people with high IQs are often too temperamental to be successful investors, he’s really speaking to a larger problem that can affect anyone. Regardless of your IQ, we are all susceptible to our personal biases, and we must always work to mitigate their influences over our portfolios.
Patience, patience, patience. Unfortunately, investors frequently forget that, by definition, investing is a long-term activity. For most people, the goal of investing is to steadily accrue profits over time in order to provide a better future for themselves. That’s a task that requires patience. Sometimes even the strongest investing decisions take a long time to pay off.
What Munger is getting at here is the old “KISS” adage: keep it simple, stupid. Here at Zacks, we also believe in a simple investing philosophy, and we’ve developed a proven system that places an emphasis on earnings estimates and earnings estimate revisions to find the highest quality stocks.
As our founder Len Zacks once infamously declared, “Earnings estimate revisions are the most powerful force impacting stock prices.” It’s that simple.
Want more advice from the investing greats? Check out the previous edition of Wednesday Wisdom, 3 Marc Benioff Quotes Every Tech Investor Needs To See, and remember to check back here next week!
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