My Favourite Stock

Dear investor,

Berkshire Hathaway just hit a major milestone, crossing the $1 trillion mark in market value. It’s a huge achievement that not only highlights Warren Buffett’s incredible investing skills but also the vital role his long-time partner, Charlie Munger, has played in building this empire.

Think about it: Berkshire started with shares priced at just $7, and now they’re worth a staggering $702,320 each! This journey is more than just about money—it’s a story of smart, disciplined investing that’s been years in the making.

While Warren Buffett often gets the spotlight, it’s important to remember that Charlie Munger has been right there with him, helping steer the ship. Together, they’ve stuck to simple, common-sense principles that have guided their decisions and led to Berkshire’s massive success.

Here’s some wisdom from Charlie Munger that I find incredibly valuable, and I hope you will too:

1. Keep It Simple: Look for Easy Wins

Charlie Munger is all about keeping things simple. He believes in making “no-brainer” decisions instead of getting caught up in complex problems. As he says, “We don’t leap over 7-foot fences. Instead, we look for 1-foot fences with big rewards on the other side.”

This means they focus on investments that are easy to understand and have a high chance of success. For the rest of us, this is a great reminder to invest in what we know and avoid getting sucked into complicated investments that might promise big returns but come with big risks.

2. Learn from Mistakes

Munger is refreshingly honest about mistakes. He doesn’t shy away from them but instead emphasizes learning from them. “You can learn to make fewer mistakes than other people—and how to fix your mistakes faster when you do make them.”

Mistakes are going to happen, but the key is to not let them define you. Learn quickly, adjust your strategy, and move forward. It’s all about being flexible and not holding onto bad decisions just because you’ve invested a lot of time or money into them.

3. Don’t Fall into Psychological Traps

One of the biggest dangers in investing is letting your emotions take over. Munger warns against the trap of continuing to throw good money after bad because you’re too invested in something to let it go. He advises that sometimes, the smartest move is to stop, rethink, and be okay with cutting your losses.

This is so important for anyone investing—it’s better to admit a mistake and move on than to keep hoping things will turn around when all signs point to the opposite.

4. Invest in a Way That Works for You

Munger’s final advice is all about personalizing your investment strategy. “There’s no one-size-fits-all investment strategy. Mine works for me. But in part, that’s because I’m good at taking losses. I can take ‘em psychologically. And, besides, I have very few.”

This is a great reminder that what works for one person might not work for another. It’s essential to understand your strengths, weaknesses, and what you can handle emotionally when it comes to investing. Your strategy should reflect who you are and what you’re comfortable with.

I hope you find this newsletter useful!

Arigato!

Chloe
Arigato Investor