Lessons from Charlie Munger- IV - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Lessons from Charlie Munger- IV

Mar 3, 2011

In the previous article, we had discussed how a wrong set of incentives across the entire economic system was responsible for the US financial crisis. Today, please do not panic, for we are going to talk about love.

Liking and loving tendency Love is one of the most basic of emotions. The very first manifestation of it is between a mother and the new-born child. For a child, this earliest experience has far reaching effects. The child learns to love and to be loved in return. It becomes a kind of a programming device. And it extends not only towards people, but also towards things, ideas and concepts. Of course, the child learns to dislike and hate as well. But we'll limit this piece to our tendency to love and to like.

This tendency to love has its own set of side effects. It acts as a conditioning device and often distorts our perceptions. To make it simple, think of someone you love- your spouse, your kid, your favourite actor or cricketer. You could also think of any idea or belief that is very dear to you. Now ask yourself these questions:

  • Do you tend to ignore their faults? Do you readily comply with their wishes?

  • Do you favour people, products, and actions merely associated with them?

  • Do you distort any unpleasant facts about them?

Now why are we talking about all this? Has it got anything to do with investments and stocks? Most certainly yes! We are firmly of the belief that being a successful investor requires discipline and a sound emotional make-up.

Have a look at your stock portfolio. There is one very common error that most investors do with stocks that they own. Once they have bought a stock, they automatically start developing a feeling of affection towards it. Don't we often hear people raving about certain blue chips with an admiration that borders around reverence? Any negative comment about them will either be ignored, dismissed or defended. It almost seems like a marriage brimming with loyalty and affection. Take the so-called "hot" sector stocks. Don't they often cause many a feeble hearts to melt? And what happens to all thoughts about business and valuation? Well, well, well... You know best. We dislike challenging and reasoning with things and ideas that we love.

Our bottom line is this. Do fall in love, but not with your stocks. Love your capital and do the best you can to protect it and to help it grow. And what better of doing that than being a disciplined value investor!

To be continued...

Lessons from Charlie Munger Article Series - Previous article | Next | All Articles
Try the Charlie Munger Quiz

Equitymaster requests your view! Post a comment on "Lessons from Charlie Munger- IV". Click here!


More Views on News

Smallcap Revival: Should You Wait, Keep Holding, or Buy Now? podcast (Views On News)

Jan 25, 2021

Here's how to not miss 10 best days for your portfolio returns.

You Are What You Believe (Fast Profits Daily)

Jan 25, 2021

In today's video, I'll show you why it's not a good idea to blindly support the bullish consensus prevalent in the market these days.

Is the Tata Motors Stock Running Out of Juice? (Profit Hunter)

Jan 25, 2021

Is the valuation for this 5-bagger running ahead of its fundamentals?

Will the Top Mutual Fund Schemes of 2020 Be among the Top Performer in 2021? (Outside View)

Jan 25, 2021

PersonalFN explains whether you should invest in top performing mutual funds of 2020.

Great vs Good: Which Stock Will Win in 2021? podcast (Views On News)

Jan 22, 2021

Rahul Shah discusses which group of stocks performed the best in 2020 and its implications for your portfolio.

More Views on News

Most Popular

Top Investing Gurus of India

Investing gurus are the champions of value investing. These are the people who've mastered the art of compounding wealth from...

Time to Book Profits in Pharma Stocks (Fast Profits Daily)

Jan 15, 2021

In this video, I'll show you why it might be the right time to take money of the table in pharma stocks.

Smallcap Stocks: Your Best Bet for 2021 and Beyond (Profit Hunter)

Jan 15, 2021

The pandemic failed to thwart Richa's investing success formula for 2020.

One Chart to See Before You Sell (Fast Profits Daily)

Jan 22, 2021

In this video, I'll show you a crucial chart that you need to check before you decide to sell any stock or index.

Invest in the Multibaggers of 2021 and Beyond (Profit Hunter)

Jan 21, 2021

Our ace stock picker is ready to capitalise on a big growth opportunity.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jan 25, 2021 (Close)