Charlie Munger’s investing system – Simplicity


Munger follows an investing system that focuses on simplicity. He follows Benjamin Graham’s investing principle – keep things simple.
This means to invest in businesses that are not over your head. Buy shares for less than their future earning potential. You will need patience waiting for them to appreciate.
Wait for the right moment to make a new investment. This method requires a realistic approach.
There are three important principles
First, treat owning a share as ownership in a business. You won’t understand the value of your shares unless you truly know the company in which you are investing.
Second, buy at a discount to give yourself a margin of safety. A margin of safety is the difference between the share’s current market price and its intrinsic value, that is, its future cash flow.
Third, stay rational. This is harder than it sounds. It’s your job to remain unemotional when selecting investment opportunities. Never allow your emotions to take control of your investing decision.
Here are some rules to succeed in investing.
Do not move your shares too often. Selling and buyer incurs commissions and fees. Try not to follow the herd. You don’t have to buy when everyone is buying. In fact, it is always safer to stay out when the market is overbought.
Differentiate between investing and trading. For investing, hold a long term view and always be well diversified. Trading is a type of work. Investing is allowing money to work for you.
At Seeking Returns, we hope non-professional investors take on non-discretionary investing. See the strong evidences here.