10 ideas worth $704 billion

He’s been Warren Buffett’s right-hand man for over 45 years:

Charlie Munger.

And together these investment legends built a $704 billion dynasty.

Munger says these 10 simple ideas are responsible for their success:

1. Opportunity cost

“Proper allocation of capital is an investor’s number 1 job.”

If you want to be successful, you must be opportunity driven.

Avoid falling in love with investments and always be open to exiting positions.

Stay informed on market trends, industry development, economic indicators, and earnings reports to identify potential investments.

“Good ideas are rare — when the odds are in your favor, bet heavily.”

2. Why you lose money

Munger says investors lose money because:

• They’re misled

• They have no margin of safety

• They’re okay with losing money

• Inflation and interest rates are high

• They take on too much risk for the reward

If you can address each of these areas, your chances of losing money decrease dramatically.

3. Decisiveness

Luck is when preparation meets opportunity.

But opportunities don’t happen often.

So when they do occur, you must capitalize on them.

This means being greedy when others are fearful and fearful when others are greedy.

4. Priorities

Life is full of new investment “opportunities." There’s always something to chase and somewhere to make money.

This pattern is inevitable.

Munger says to ignore the noise.

• Stick to what works

• Pay attention to detail

• Focus on the information in front of you

“A majority of life's errors are caused by forgetting what one is really trying to do.”

Don’t let the attractiveness of fast cash distract you from your strategy of long-term wealth.

5. Flexibility

“Recognize and adapt to the true nature of the world around you; don’t expect it to adapt to you.”

Uncomfortable truth: You’re not important enough for the world to revolve around you.

Even if you think you’re right, there’s still a possibility that you’re wrong.

Just because you don’t like the facts doesn’t mean they’re false.

When it comes to investing, it’s not our job to create truth.

Our job is to merely interpret it and use it to our advantage.

That means changing your thesis when new information is made available and swallowing your pride if you’re wrong.

6. Patience

Focus on the process because “the process is where you live.” 

Focus less on the outcome, and more on your investment strategy and research methods.

If you perfect the strategy, the outcome will be favorable.

If your strategy is poor, your outcomes will be too.

7. Humility

You don’t know everything.

Munger says to:

• Resist false certainty

• Stick to what you know

• Pay attention to disconfirming evidence

“Knowing what you don’t know is more useful than being brilliant.”

This makes it easier for you to address your weaknesses to confirm your research is accurate.

8. Always be learning

“If you want to get smart, the question you have to keep asking is ‘why, why, why?’”

Ask questions, then answer them with:

• Blogs

• Books

• Courses

• Podcasts

• YouTube videos

• Higher education

You have access to the world’s greatest minds right in your pocket.

Do whatever it takes to learn something new every day.

9. Risk management

Your plan to minimize mistakes should include:

• Value over Price

• Wealth over Size

• Progress over Activity

• Studying companies, not markets

• Forward-thinking instead of backward thinking

And do this for every investment you make.

10. Independence

Investors lose money because they follow the herd.

“Mimicking the herd invites regression to the mean.”

To get above-average results, your actions need to be above-average too.

Like Dave Ramsey says, “If you live like no one else today, you can live like no one else tomorrow.”

This means carving your own path.

I hope you enjoyed these 10 lessons from Charlie Munger.

Which one was your favorite?

Reply to this email and let me know!