Blog on Value Investing | Safal Niveshak

Conversation with Charlie Munger

Some call him Warren Buffett’s alter ego. Some know him as Buffett’s quirky business partner. But whatever he is called, Charlie Munger is ‘the’ original thinker and the silent man behind the success of Buffett’s investment company Berkshire Hathaway.

Ask people about Berkshire Hathaway, and most will tell you that it’s Warren Buffett’s company, which is true as far as it goes.

But those in the know recognize that Berkshire’s success is actually the product of a tag-team effort by Buffett and Munger.

The small talk between Buffett and Munger during Berkshire annual general meeting has become folklore.
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Why Most Investors Don’t Succeed in the Stock Market

“First, expect to be wrong in the stock market.”

My friend Ravi had a puzzled look on his face. He asked me, “What are you saying Vishal? One has to always be right to survive in the stock market. And you want me to expect to be wrong?”

Ravi isn’t an exceptional case. I have seen so many other investors amazed when I ask them to expect to be wrong in the stock market.

You see, one of the most important traits of successful investors is that they recognize the frequency with which they can get ‘clean bowled’ – and thus they have a plan in place to deal with such situations.

This is the first lesson most new investors fail to digest, and thus neglect.
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“Just cheer up… it’s not so bad out here.”

These are the words of Philip Lynch, the chief executive officer of Nomura Asia Holding, who talked to Economic Times.

India is the ‘place to be’ for long-term investors, believes Lynch. “Just cheer up… it’s not so bad out here,” is his advice. As he says:

“Not everything is bad… to list a few positives, corporates are in good shape, leverage is low and corporate cash balances are high. I don’t think governments will allow asset prices to decline beyond a point. Quantitative easing might be coming to an end, but governments will make sure there is enough liquidity and fiscal support. I am not saying that next year or year after that will be particularly smooth sailing for Asian countries. But then, if you want long-term opportunities, Asia, in general, and India, in particular, are the places to be.”

Are You a Stock or a Bond?

No, there isn’t a mistake in the above headline. I am not asking whether you own stocks or bonds.

What I am asking here is – Are ‘YOU’ a stock or a bond?

This is the very first question you must answer before you get down to investing in the stock markets. But before that, you must be very clear about these two basic questions:

What is a stock?
What is a bond?

A stock is a share in a company, and thus its performance is dependent on how the company’s business does.

In short, a stock’s future performance is unpredictable. This is because it is backed by a company that has inconsistent earnings (in most cases) and subsequently inconsistent performance.
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You’re fighting a losing game

If you are a stock market investor, no wonder you think the game is rigged against you…

No wonder you think the financial services industry is a racket, and the stock market is a game reserved only for the chosen few.

No wonder you think the stock market experts appearing on business channels try to lure you into stock advice that can serve their own vested interest.

You didn’t need the recent stock market crisis to tell you that. However, what you may not realise is just how devastating dishonest and biased stock market advice can be to your long-term wealth.

Before it gets too late, you need to rail against this deep-rooted systemic injustice.

I propose a simple solution…
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