5 Lessons From A Billionaire To Invest Better & Become More Successful
Taken as an excerpt from Jari Roomer Personal Growth Lab
1) Pursue A Multi-Disciplinary Approach
Charlie Munger (Warren Buffet’s partner) is known for his multi-disciplinary approach to investing.
He believes that developing expertise in multiple disciplines (such as psychology, economics, history, and technology), can help investors identify patterns and spot opportunities that most others would miss.
Munger once said, “If you skillfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands.”
The best investors don’t overly focus on one area of expertise (e.g. technology or finance), but understand the basics of various topics.
This allows them to string together ideas and insights that most people would overlook.
2) Invest In Businesses That Idiots Can Run
Many investors — especially newer ones — fail to see stocks as ownership of an actual business. Instead, they treat it like lottery tickets that hopefully go up in value.
But profitable investing isn’t about hoping your stocks go up, it’s about picking the highest-quality businesses with the highest degree of long-term success.
“Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it earns,” says Munger.
Remember, in the long run, the value of a stock comes from the quality (growth and profitability) of the underlying business.
It’s as simple as that.
That’s why it’s essential to only invest in high-quality businesses with strong growth, high profit margins, and a simple business model.
… Not because a stock is trendy on the internet.
… Not because there’s a lot of hype around it.
But simply because it’s a solid, profitable, high-quality business.
As Charlie Munger said, “Invest in a business any fool can run, because someday a fool will. If it won’t stand a little mismanagement, it’s not much of a business.”
3) Develop Patience and Discipline
Patience and discipline are two skills you need to develop to be a successful investor.
As Charlie Munger famously said, “The big money is not in the buying and selling… but in the waiting.”
Impatience leads to impulsive decision-making and hopping from trend to trend. This is usually the fastest path to losing your money.
Furthermore, don’t get tempted by other people’s quick successes.
As Munger said, “Someone will always be getting richer faster than you. This is not a tragedy.”
Especially on social media, you might hear stories of investors making hundreds of thousands of dollars in just a few weeks based on one lucky trade.
But for every investor who made a quick fortune, there are hundreds of investors who lost a lot of money. Those are the stories you don’t hear…
All in all, successful investing is long-term investing. It requires patience and discipline.
4) Stick To The Basics
A lot of people believe that wealthy people possess some sort of secret knowledge or know about magic shortcuts to get rich.
But building wealth is nothing more than sticking to basic principles for long enough until it pays off:
· Spend less than you earn and avoid over-consumption
· Invest a percentage (e.g. 15%) of your income every month
· Invest in high-quality assets and avoid speculation
· Keep learning high-value skills so you can increase your income
As Munger once said, “Our ideas are so simple that people keep asking us for mysteries when all we have are the most elementary ideas.”
Building wealth isn’t rocket science. It’s about doing ordinary things right over a long enough timeframe.
5) Never Stop Learning
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines,” said Charlie Munger.
Learning doesn’t stop when you’ve finished formal education — that’s when it starts.
As Munger said, “Those who keep learning, will keep rising in life.”
· Read books to gain more insights
· Follow courses to learn new skills
· Seek mentors to gain more wisdom
· Listen to podcasts to stay up-to-date on industry trends
· Practice your craft daily to reach mastery
No matter your preferred method, just keep learning.
Charlie Munger is especially fond of reading books. “In my whole life, I have known no wise people who didn’t read all the time — none, zero,” he said.
All in all, successful people are continuous learners. That’s how they stay at the top of their field.
To conclude with Munger’s words of wisdom, “Spend each day trying to be a little wiser than you were when you woke up.”
