Know whether the gamble is mispriced

You're looking for a mispriced gamble. That's what investing is. And you have to know enough to know whether the gamble is mispriced. That's value investing.

- Charles Munger

'Bet' selectively

To me, it's obvious that the winner has to bet very selectively. It's been obvious to me since very early in life. I don't know why it's not obvious to very many other people.

- Charles Munger

Avoid the herd

Mimicking the herd invites regression to the mean.

- Charles Munger

Focus Investing

Our investment style has been given a name - focus investing - which implies ten holdings, not one hundred or four hundred. The idea that it is hard to find good investments, so concentrate in a few, seems to me to be an obvious idea. But 98% of the investment world does not think this way. It's been good for us.

- Charles Munger

Business vs Manager

However, averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager.

- Charles Munger

What you should buy

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 - 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.

- Charles Munger

Know the pitfalls

A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.

- Charles Munger

Train your brain to work better

I think it is undeniably true that the human brain must work in models. The trick is to have your brain work better than the other person's brain because it understands the most fundamental models- ones that will do most work per unit.

- Charles Munger

It is not easy

Why should it be easy to do something that, if done well, two or three times, will make your family rich for life?

- Charles Munger

Unpopularity as a measure

Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group…then to hell with them.

- Charles Munger

Three steps

Determine value apart from price; progress apart from activity; wealth apart from size.

- Charles Munger

Entitled to opinion

I'm not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I've reached that state.

- Charles Munger

Bet big when you have the odds

It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a mispriced bet - that they can occasionally find one. And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time they don't. It's just that simple.

- Charles Munger

Wisdom

Acknowledging what you don't know is the dawning of wisdom.

- Charles Munger

Address the problem immediately

Some people seem to think there's no trouble just because it hasn't happened yet. If you jump out the window at the 42nd floor and you're still doing fine as you pass the 27th floor, that doesn't mean you don't have a serious problem. I would want to address the problem right now.

- Charles Munger

Value business in order to value the stock

All intelligent investing is value investing – acquiring more than you are paying for. You must value the business in order to value the stock.

- Charles Munger

Graham's idea will never obsolete

The idea of a margin of safety, a Graham precept, will never be obsolete. The idea of making the market your servant will never be obsolete. The idea of being objective and dispassionate will never be obsolete.

- Charlie Munger

Man's imperfect

Man's imperfect, limited-capacity brain easily drifts into working with what's easily available to it. And the brain can't use what it can't remember or when it's blocked from recognizing because it is heavily influenced by one or more psychological tendencies bearing strongly on it.

- Charlie Munger

Take advantage if your judgement is right

Over many decades, our usual practice is that if [the stock of] something we like goes down, we buy more and more. Sometimes something happens, you realize you're wrong, and you get out. But if you develop correct confidence in your judgment, buy more and take advantage of stock prices.

- Charlie Munger

Fewer opportunities today!

If you have only a little capital and are young today, there are fewer opportunities than when I was young. Back then, we had just come out of a depression. Capitalism was a bad word. There had been abuses in the 1920s. A joke going around then was the guy who said, 'I bought stock for my old age and it worked - in six months, I feel like an old man!' It's tougher for you, but that doesn't mean you won't do well - it just may take more time. But what the heck, you may live longer.

- Charles Munger