When it comes to finding success in investing, there are a handful of investors that we can listen to.
One of them would be Charlie Munger. While he might be more well-known as billionaire investor Warren Buffett’s long-time right hand man, Munger is still a very successful investor in his own right.
In Buffett’s seminal 1984 investing essay The Superinvestors of Graham and Doddsville, he had included a list of investors whom he thought deserved the “Superinvestor” tag because of their phenomenal track record; Munger was on that exclusive list after delivering gains of more than 1,100% for his clients from 1962 to 1975.
With these in mind, here’re a couple of recent insightful views from Munger.
"I did not succeed in life by intelligence. I succeeded because I have a long attention span." — Munger $DJCO
— Alex Rubalcava (@AlexRubalcava) March 25, 2015
Munger believed that his advantage in life and investing came from an unlikely source: A longer attention span. It would appear that Munger’s focus on the longer term may have paid off in his investment approach as well.
The same thoughts may be found in the recent trials and tribulations of Super Group Ltd (SGX: S10). The food and beverage firm suffered in 2014, with its share price falling close to 50% from peak to trough. My colleague Ser Jing was undeterred though, noting the following thoughts in his article:
“At Super Group’s November-low [of around S$1.00], I was sitting on losses of around 45% (on my first purchase) and 25% (on my second purchase). But I didn’t sell because I thought the business was still going fine.
The company still had a great balance sheet (S$79 million in cash with just S$30 million in debt) and was still churning out cash with S$34 million in operating cash flow for the first nine months of 2014 – these are all resources Super Group can use to fuel future growth.”
With shares of Super Group exchanging hands at $1.49 currently, it would appear that Ser Jing’s conviction in the company has paid off.
Munger: "Nobody survives open heart surgery better than the guy who didn't need the procedure in the first place."
— Morgan Housel (@TMFHousel) March 26, 2015
In another quote, Munger alluded to a point that was often under-appreciated: Prevention may be better than cure when it comes to investing.
Similarly, if we invest with cash which we will need next year, we are opening ourselves up to short-term volatility which may undo our best laid plans.
As the summary chart below on the annual returns of the Straits Times Index (SGX: ^STI) shows, the stock market’s returns may vary greatly from year to year.
Source: S&P Capital IQ
As such, Foolish investors may be better off if they did not invest using funds which are needed for emergencies or for use over the next five years. This preventive measure could go a long way in increasing your chances of securing good returns over the long-term. This measure could also prevent you from having to sell at the wrong moments – like when the market’s down and you just so happen to need to use money for emergencies.
I hope that you found the musings of Munger to be useful in finding success for your goodself. I know I did. Fool on!
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Super Group.