Why hunger for knowledge matters

Investing is about never stopping to learn. You must not dive deep into it if you do not fancy such a thing.

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Charlie Munger was no second fiddle. Although he served as the number two to legendary American investor Warren Buffett at their company Berkshire Hathaway, he was no less of a legend. His ideas and thoughts complemented Buffett and expanded the horizon of investing thinking.

In a book about his investment style, author Tren Griffin discusses five key aspects. These include continuous learning, simplicity, patience, courage and worldly wisdom. In the context of the record share prices and the attraction towards getting rich quickly, you may want to take a leaf out of Munger’s investment philosophy.

There are no individuals in India who stand out like Buffett and Munger. The way they led their lives and made money not just for themselves but also for the shareholders and businesses they owned, there are very few parallels in the world. One can say that the organisation that comes close to the ‘buy and hold’ philosophy and has prospered is the government-owned Life Insurance Corporation of India, the biggest insurance company.

They have held on to their core holdings in Reliance Industries, ITC and other blue-chip companies for years. The compounding benefit and dividend payout have made LIC the most prominent equity assets owner than most mutual funds. By owning over 90% of LIC, the government effectively follows the strategy of patience. Insurance companies are not active fund managers. They are long-term investors. Patience plays a crucial role in riding through market cycles.

Continuous Learning

According to most studies studying how we think, our brains expand if we learn something new every day. Charlie Munger lived till 99, and Buffett is 94 and going strong. The secret to their long life is their hunger to learn new things. Munger made it a point to study more about worldly wisdom, philosophies, ethics, and many other things unrelated to the world of investment. He used the best knowledge from everywhere to inculcate virtues like simplicity, patience and courage. We all know about the frugal life the two most successful investors in the world led. They barely flashed their wealth. They kept their wants and needs in check so that the focus was always on adding more quality than quantity to their lives.

Investing is about never stopping to learn. You must not dive deep into it if you do not fancy such a thing. Buffett advised everybody to invest in passive index funds regularly. That applies to those not interested in finance or keen to learn.

If you are interested in creating wealth, you need to learn about yourself and the factors that influence financial markets.Discovering yourself would be the first learning that you could do. It is essential to understand the appetite you have for risk in investing. Financial markets move up in cycles. When there is a downcycle, there is a good chance that you could panic and exit when prices are low.

However, ‘learning continuously’ will tell you that the downward cycle in financial markets is a time to consolidate your investments and not exit. At the same time, when the market is booming like it is now with equity valuations stretched, there could be a period of a downward trend. Continuous learning will teach you to use patience as an investment strategy.

Investing in equity markets is all about patience and courage. To hang on to your fundamentally substantial investments, you need courage. To pick the right stocks at the right time, you need knowledge. To create wealth, you need the patience. To ride through the market cycles, you need worldly wisdom.

Another critical factor is relying on professionals to help you assess your ability to take risks. You may want to get help carefully planning a portfolio that aligns with your risk appetite and financial goals. If you are new to investing, you may want to get that right first. If you are already actively involved, you can have some meaningful conversations with your advisor on the outlook for markets. Your ability to learn could make your conversations with your advisor invaluable.

Rajas Kelkar

(The author is editor-in-chief at www.moneyminute.in)