You can purchase “The Complete Investor” By Tren Griffin here if you would like to read the book in full.
The Complete Investor Book Summary
If you are actively involved in value investing or are just getting started investing, the chances are that you will have heard of Charlie Munger.
At almost 100 years old, Charlie Munger is an American billionaire businessman and investor.
Charlie Munger is known for his affiliation with the billionaire investor Warren Buffet. Charlie Munger met with Warren Buffet at a dinner party and went on to become the right-hand man and the vice chairman of Berkshire Hathaway, the company Warren Buffett took over in 1965.
Both Munger and Buffet have used this company to make investments averaging a return of 20% per year consistently.
Through Berkshire Hathaway, they own substantial stakes in the financial services company American Express, technology giant IBM and beverage giant Coca-Cola as well as many others.
Charlie Munger has also served as the chairman of Wesco Financial Corporation from 1984 through 2011, and he is also the chairman of the daily journal based in LA, California, and is also the director of Costco Wholesale Corporation.
So, you can see from his career that Charlie knows what he is doing when it comes to business and investment.
The complete investor book.
The book “the complete investor” is written by Tren Griffin and offers a large amount of insight into Charlie Munger’s quotes, comments, and strategies around investing, some of these quotes you have probably heard before if you have been in the investment industry a while:
Quotes:
“Successful investors … must possess an interest in the process. It’s no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.”
“Three things ruin people: drugs, liquor, and leverage.”
“Too much competency and no gumption is no good.”
When good management is brought into a fundamentally bad business, the business’s reputation remains intact.
The book’s first lesson is that you treat your stock as an ownership stake.
When you buy a company’s stock, you purchase a piece of that business. You own a small proportion of it. If you think about your stocks and shares in this manner, you will have a great deal more respect for them than if you treat them as another stock symbol in your portfolio.
Charlie Munger advocates that when you buy shares in a business, you should treat the shares, no matter how small the number you buy, as if you were buying the whole company.
When looking at buying shares in a business, you need to start from the fundamentals when you begin your research, then work your way up.
- What does the company do?
- What do they sell?
- What service do they provide?
- What is the value the business generates for its customers?
The key fundamental is that if you do not understand the company and what it does, you cannot understand the underlying assets of the business.
You cannot ascertain its actual value to know if it is under or overvalued, and therefore whether you should invest or not.
Focus on the core value of business.
If you focus on the core value of the business you are looking at buying stock in, you do not need to consider short-term fluctuations and ripples in the economy, as the core of the business remains sound throughout any economic turmoil.
Charlie Munger says that if you fail to do this ground-up research on the businesses for which you are buying stock, you are a speculator rather than an investor.
If you are an investor, you are trying to determine the actual value of the asset so that you can make the correct educated decision about whether to invest or not.
Speculating on a business.
Speculating on a business is the lazy approach to investing in stocks and shares and is merely a gamble on red or black. This does not require skill, and 99.9% of speculators lose money in the stock market.
You would probably have more luck throwing a dart at a dart board to pick a stock if you are speculating and not doing the correct research.
If you invest after doing accurate in-depth research, your portfolio will be much more successful than any speculator’s portfolio will ever be.
The second lesson from the complete investor is to keep an eye on long-term opportunities.
Remember, when buying the stock of a company, you are taking ownership of that business. For long-term opportunities and gains, look for companies which have good valuations and look to buy them at a discount.
This strategy includes holding tried and tested assets like stocks, bonds, exchange-traded funds (ETFs) and mutual funds.
Investors who take a long-term approach will require discipline and patience, this is because investors must be able to take on risk while they wait for higher rewards down the road. It is advisable to hold stocks for the long term.
S&P 500 Experienced loses.
The S&P 500 experienced losses in 11 of 47 years from 1975 to 2022, making returns volatile in the short term, but averaged out over the long-term.
Investors who played the long game were rewarded with average returns in the 10% range.
Stocks should be considered to be long-term investments. This is because stocks can drop 10% to 20% or more in value over a short period.
Investors have the opportunity to ride out some of these highs and lows over many years or even decades to generate a better long-term return.
If we look back at stock market returns since the 1940s during the era of world war ii, people have not lost very often investing in the S&P 500 over a long term 20 year period.
Considering setbacks.
Even considering setbacks, such as the Great Depression, Black Monday, the tech bubble, and the 2007 financial crisis, investors would have experienced gains had they invested in the S&P 500 and held it uninterrupted for 20 years.
So always think long-term and do not try to time the markets; as we always say, it’s time IN the markets, not TIMING the market, which is the correct investment strategy.
And while past results are no guarantee of future results, history does suggest that the markets favor the long-term players over the short-term market traders.
The third lesson is the importance of consistent learning.
Successful investors like Charlie Munger and Warren Buffett not only invest in stocks and shares, but they invest heavily in themselves.
80% of Charlie Mungers’ day is spent reading and absorbing as much financial information as possible, and Munger believes this is key to his successful investing.
Mungers successes as an investor stem from his desire to learn new things. He has the belief that successful investors are learning machines.
The next lesson from the book is to learn the traits of the value investor.
There are 13 key traits that a value investor possesses, a value investor is someone who picks stocks that appear to be trading for less than their actual value, and those traits are:
1. Patience
If you are investing in the financial markets, you will not get rich overnight. Think long-term and have the patience needed to stay in the investing game for the long term.
2. Disciplined.
Be disciplined in your approach to investing, research the businesses you are buying stocks in, don’t be lazy, and don’t take the shortest path. Take the path which will give you the most confidence in knowing all you can about the business you are about to own part of.
3. Calm but courageous and decisive.
You need to have a level head for investing and stay calm. The markets will rise and fall as they always do, but remain calm, courageous, and decisive.
If you have done the correct research into the business and believe it is a buying opportunity, don’t let the current economic or financial situation, good or bad, sway you from what you think is a good investment.
4. Reasonably intelligent but not misled by a high IQ.
You need to be of reasonable intelligence to understand the fundamentals of a good business. Still, people with an IQ that is too high will look too far into the details of future scenarios, which may never happen, so don’t over-evaluate and stick to the fundamentals.
5. Honest.
It would be best if you were honest, not only with yourself but with those who surround you. Being honest is not only for investors but should be part of your character no matter what you do.
6. Confident and non-ideological.
All of the stars don’t have to align for you to enter an investment. You need to be fully confident that you have researched enough to be comfortable with the risk. Doing in-depth research minimizes the risk.
7. Long term orientated.
Think in ten-year blocks in terms of investment milestones. Things don’t happen overnight. Give them a chance to breathe. When you buy a stock, you should be of the opinion that you will hold that stock forever.
8. Passionate.
It would be best if you were passionate about what you are doing, or you won’t last too long in the investing game. Be passionate about learning and investing, which will stand you in good stead for your investing journey.
9. Studious.
Learn all you can, read all you can, and watch as many YouTube videos about investing as possible. Thank you for reading this article; you will already have a considerable head start on many who fail to do this.
10. Collegial.
It is important to have someone or a group of people for whom you can share ideas with. Munger and Buffett can rely on each other for this.
11. Sound Temperament.
When investing, it is essential to have a sound temperament, so do not overreact to market situations and keep your temperament under control.
12. Frugal.
Be careful with your investment funds and only invest what you can afford to invest in the markets. Don’t blindly buy into shares without doing your research because someone said it was a good investment. Always have your emergency fund on top of your investment funds for unplanned life expenses.
13. Risk averse.
It would be best if you always aimed to minimize the risk to your investments. While it is impossible to reduce risk to zero, it is vital to de-risk any investment as much as possible by ensuring you have taken all the steps we mention in this article before investing.
Final thoughts.
Because no one knows what the future will bring, but we can bet that Charlie Munger’s philosophy on life, business, and the pursuit of truth will help guide the way.
If you are looking for inspiration, then look no further than Mr. Munger’s life experiences and the lessons he has learned.
I find that Charlie Munger is a very optimistic person. He also knows how to work on himself and can always identify the root of the problem.
You can get a copy of the Complete Investor here if you would like to read it in full; I highly recommend you do as it will help you a lot on your investing journey.
