Had Warren Buffett never been born, there's a good chance we'd award the "world's greatest investor" honor to his right-hand man, Charlie Munger. Not only is Berkshire Hathaway's
I'd continue this introduction, but as Munger might bluntly say, "Nobody would listen." Without further ado, here are five Munger quotes you should study before making another investment decision.
1. "This is really crucial: Warren [Buffett] is one of the best learning machines on this earth. The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you."
Investing is so much more than a game of numbers. If you've mastered Microsoft
2. "I think that one should recognize reality even when one doesn't like it -- indeed, especially when one doesn't like it."
There's a big difference between not swaying into the madness of crowds and not realizing when the facts have changed and adjusting accordingly. Unfortunately, it's incredibly hard to come to terms with this when your investments are gushing red ink. Not to pick on a battered soul, but Crocs
3. "To me, it's obvious that the winner has to be very selective. It's been obvious to me since very early in life. I don't know why it's not obvious to very many other people."
It's easy to get caught up in grandiose dreams about successful investments, which typically leads to rushing out and putting your hard-earned money to work as soon as possible. But think about it: If, every time you sat down at your computer in search of a winning investment, you actually found one, the good ideas would quickly be exploited and outsized returns would never exist. The big winners -- like buying Amazon
4. "Mankind invented a system to cope with the fact that we are so intrinsically lousy at manipulating numbers. It's called the graph."
Got that, chartists? If the past were a road map to the future, your high school history teacher wouldn't be driving a 1979 Volvo wagon. To pull a quote from Buffett, "I realized that technical analysis didn't work when I turned the chart upside down and didn't get a different answer." Seems simple enough, but the amount of people trying to foretell the future with squiggly lines is downright bewildering. When Devon Energy
5. "Some people seem to think there's no trouble just because it hasn't happened yet. If you jump out the window at the 42nd floor and you're still doing fine as you pass the 27th floor, that doesn't mean you don't have a serious problem. I would want to address the problem right now."
This quote reminds me of one thing: investors who know darn well a stock is overvalued, but insist on holding it because "it's still going higher." I guess it's only natural: The thought of selling something, only to watch it climb ever higher, can be a miserable one. The problem is that you'll never know for certain exactly when a stock either bottoms out or tops out. Those who hold out for the last drops of success are the ones who end up getting slaughtered.
Check back next week for five more Munger quotes that will make you a better investor. Until then, check out:
Crocs is a Motley Fool Hidden Gems Pay Dirt selection. Microsoft and Berkshire Hathaway are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers selection. Berkshire Hathaway and Amazon are Motley Fool Stock Advisor picks. The Fool owns stock in Berkshire Hathaway. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Morgan Housel owns shares of Berkshire. He once had his picture taken with Charlie Munger, only to have him lean over to a staff member and yell, "Somebody tell me how many more of these damn pictures we have to do." The Fool's disclosure policy has never had such a problem.