Quote of the Day by Charlie Munger: ‘We have three baskets for investing…’

Berkshire Hathaway co-founder and long-time friend of Warren Buffett, legendary investor Charles Thomas Munger has built a following of his own among the community. The late billionaire left behind a treasure trove of tried and tested investing advice over the years.

Even Buffett (95), dubbed ‘The Oracle of Omaha’ due to numerous impeccable investment decisions over the years, credits Munger for teaching him a few things.

In an obit piece after Munger passed away in November 2023, Bloomberg noted his importance as a “straight man and scold of corporate excesses” who provided a reality check and balance against Buffett's fame and wealth.

According to Munger, one cannot successfully invest in a business and get good returns without understanding what the business does, how it plans to make money, or what market opportunities exist for that business. You must also be aware of its USP, in case of high competition.

This is a belief also shared by Buffett, who feels investors to be aware of what they are getting into. In 2011, he told Bloomberg that he initially “missed the boat” for tech stocks, but he does not regret it because he did not understand the business.

The duo consistently advised investors to focus on businesses and sectors they truly understand by avoiding trends and focusing on value proposition, i.e. well-established companies with a clear growth path.

A lawyer by training, Munger helped Buffett, who was seven years his junior, craft a philosophy of investing in companies for the long term. Buffett has credited him with shaping Berkshire Hathaway’s investing style and pushing the ‘Oracle of Omaha’ away from cheap “cigar-butt” stocks toward high-quality businesses at fair prices.

Under their management, Berkshire averaged an annual gain of 20% from 1965 through 2022 — roughly twice the pace of the S&P 500 Index. Decades of compounded returns made the pair billionaires and folk heroes to adoring investors.

Munger was vice chairman of Berkshire from 1978 until the day he died at 99 in 2023. He was also among the company's biggest shareholders, with stock valued at about $2.2 billion. His overall net worth was about $2.6 billion, according to Forbes.

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