Patience: The Art of Patient Waiting
Look at those hedge funds—do you think they know how to wait? They fundamentally don’t know how to wait! In my personal portfolio, I once held only $10 million to $12 million in government or municipal bonds for several consecutive years, and then I didn’t touch them, just quietly waited, waited…
“As Jesse Livermore said: ‘The secret to making big money is not in buying and selling… but in waiting.’”
Charlie’s Principles and Investment Philosophy
Charlie believes that foresight, patience, strict self-discipline, and impartiality are the most basic guiding principles. No matter how the outside world views it, or how his own emotions fluctuate, he always adheres to these principles. Although many people believe that “one must learn to adapt to random changes,” Charlie never wavers. If one can steadfastly follow these principles, it demonstrates one of Munger’s most famous characteristics: not frequent trading.
Like Buffett, Munger believes that only a few decisions are enough to achieve a successful investment career. Therefore, when Charlie finds a company he likes, he places a very large bet, and usually holds the stock of that company long-term (see “The Investment Performance of Charlie Munger’s Partnership” in Chapter 1). Charlie calls this method the “Sit-and-Wait Investing Strategy,” and clearly points out its advantages: “You pay less fees to the trader, and hear less nonsense; if this method works, the tax system will also give you an extra 1% to 3% return every year.” In his view, buying just three stocks is enough. Therefore, Charlie is willing to commit a large proportion of funds to individual “noteworthy” opportunities. No Wall Street institution, financial advisor, or open-end fund manager would make such a declaration!
Lessons from Warren’s Investment Course
“When Warren was teaching in business school, he said: ‘I can improve your final financial situation with one attendance card; this card has 20 slots, so you only have 20 opportunities to punch in throughout your life—this represents the number of investments you can make in your life. Once you punch the card, you can no longer invest. Under this rule, you will truly consider every investment action carefully; you will have to put large sums of money into the projects you truly want to invest in. This way, your performance will be much better.’”
Investment Rhythm and Strategy
Quickly annihilate what should not be done, then launch a skilled, interdisciplinary attack on what should be done, and then, when the right opportunity comes—only when the right opportunity comes—take decisive action.