Charlie Munger's Contrarian Advice | Investing Strategies

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Hey there!

Recently, the world lost a great soul - Charlie Munger, vice chairman of Berkshire Hathaway, and Buffett’s business partner, died on November 28th, just a month short of his 100th birthday.

Known for his dry wit, Munger’s investing style has influenced several in the investment community as he challenged investors to think differently about how they allocated their money.

In his remembrance, here are 3 of our favorite pieces of contrarian advice by Munger:

1. ‘Diworsification’

One of Munger’s most prominent viewpoints was to avoid over-diversification, as he believed that the concept was taken too far. Instead, he advocated for concentrated investing. It’s better to choose a few good securities and invest only when you have "extra knowledge" than the market, rather than trying to be everywhere.

2. Invert, always invert

Inspired by algebraist Carl Jacobi, Munger always “sought good judgment mostly by collecting instances of bad judgment, then pondering ways to avoid such outcomes”. For example, if you want to retire comfortably, don’t think about how to do that. Instead, think of how not to retire in extreme poverty, like avoiding bad spending habits, not falling for get-rich-quick schemes, etc.

3. Don’t try to predict the future

Despite Berkshire Hathaway’s great success, Munger said that one of the pillars of their success is their ability to admit that they cannot predict the future. He says, “I don’t make money predicting accurately. We just tend to get into good businesses and stay there.” If one of the greatest investors of all time didn’t think they knew how to predict the future, who are we to predict stock prices?

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