Investor Education
Simple Rules
“To avoid the various foolish opinions to which mankind are prone, no superhuman genius is required. A few simple rules will keep you, not from all error, but from silly error.” —Bertrand Russell
In 2019, Charlie Munger fielded questions at the Daily Journal Annual Meeting and was asked about advice for his younger self, among other things. Throughout the meeting, he responded that it’s usually the trite things—the simple, the obvious—that carry the most weight in life, such as:
“There’s no point in fretting too much about what you can’t fix.”
“It’s a big mistake if you fill yourself with resentments and hatreds.”
“Envy is such a stupid thing to have because you can’t possibly have any fun with that particular sin…. Somebody is always going to be doing better than you are, and it’s really stupid [to have envy about that fact].”
“People just seek out the weaknesses of their fellow man and take advantage. And you have to get wise enough so you avoid them all. And you can’t avoid them if they’re in your family. I have no solution to that one. But where you have a fair choice, there are just so many people that should be avoided.”
“Figure out what’s really stupid and then avoid it.”
Don’t overspend your income, like Mozart did.
“A problem thoroughly understood is half-solved.”
“The trick in coming out well [is] seizing your fair share of opportunities that [come] along…. I always knew since I was a little boy that the opportunities that were important that were going to come to me were few, and that the trick was to prepare myself for seizing the few that came.”
The last year has seen many investors wish they had kept things simple. Companies that were going to change the world ended up seeing the most significant changes they made occur in the wealth of their shareholders—when their stock prices fell by 70%, 80%, 90%, or more. And the ongoing fallout from FTX and the rest of the crypto market has some “investors” in the space wishing they’d never heard of the blockchain.
With a significant volume of stock options that are traded having expiration dates within one week or even one day, the desire to speculate is still alive and well. The bear market hasn’t yet been severe enough to dent the confidence of those trying to get rich as quickly as possible.
We don’t know what the near-term holds for markets or inflation or whatever was in the news yesterday, today, or will be in the news tomorrow. But the simple, trite pieces of advice that stand the test of time are probably the things worth ensuring you’re paying attention to as you navigate the world.
“Part of that [having uncommon sense], I think, is being able to tune out folly, as distinguished from recognizing wisdom. You’ve got whole categories of things you just bat away so your brain isn't cluttered with them. That way, you're better able to pick up a few sensible things to do.” —Charles Munger
“Order and simplification are the first steps toward the mastery of a subject.” —Thomas Mann
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