The Art of Stock Picking by Charles Munger

Charlie Munger requires no introduction as partner to the world’s best investor Warren Buffett. I’ve always enjoyed reading about and listening to Charlie as he is not only incredibly smart and rational but has high moral integrity; a rare combination in the business world.

I wrote this as I wanted to share an article which Charles published in 2006 called the “Art of Stock Picking” which spells out pretty much all you need to know about becoming a successful investor amongst other life lessons. In a nutshell, Charlie investing philosophy is:

1. Know your circle of competence
2. Bet seldom, be very selective
3. Opportunities are rare so you will have to work, work and work to find one.
4. When you spot the opportunity, bet big.
5. You don’t need that many opportunities in your lifetime. Most of Berkshire’s value came from 10 insights.

As Charlie’s record as an investor is not as widely known as Warren, I thought I show what an investor would have earned (before fees) by investing a $1,000 in Charlie and Warren’s investment partnership over an overlapping period of time when they both ran separate investment partnerships.

Over the entire period both men ran their partnerships, the compound annual return of Warren Buffett and Charlie Munger was 29.5% and 19.8% respectively (pre-fees).

Hopefully you’ll enjoy the article it as much as I have. Comments and feedback much appreciated.