7 Timeless Investing Lessons From Warren Buffett’s Longtime Business Partner Charlie Munger

Warren Buffett credits most of his success to having a good business partner. He worked with Charlie Munger for 45 years. They became more than friends.

Many investors have benefited from listening to Buffett’s wisdom over the years, but there is much to learn from Munger. In Buffett’s latest letter Berkshire Hathaway (BRK.A 1.39%) (BRK.B 1.53%) Shareholders, he said, are what he and Munger usually care about. But Buffett said his partner’s opinion “is always clearly evaluated and wiser — some might add bluntly –.”

In the letter, Berkshire shared several quotes from Munger. Here are seven timeless investing lessons from Buffett’s longtime business partner.

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1. “The world is full of foolish gamblers, and they don’t do as well as patient investors.”

Some people see investing as gambling. Munger cleverly refutes this idea in this sentence. Some people buy stocks with the mindset of a gambler, but it doesn’t fare as well as someone who invests in a business, holds the stock, and gives the business ample time to grow.

2. “If you don’t see the world as it is, it’s like judging things through a distorted lens.”

It is easier for investors to rely on wishful thinking than careful analysis. But if you follow Munger’s advice, you’ll recognize your own biases and push them aside. The actual business performance of the company is what matters, not what those prospects expect to be.

3. “If you can swim deep in the sea, don’t bail on a sinking boat.”

Don’t assume that buying and holding means you’ll never sell a stock. Buffett and Munger don’t hesitate to sell a company’s stock if they don’t believe the business is strong. If your premise for buying a stock is no longer worth it, consider selling it and reinvesting with a better opportunity.

4. “Warren and I don’t focus on market bubbles. We look for good long-term investments and hold them aggressively for the long term.”

Smart investors follow the examples of Buffett and Munger, and avoid getting caught up in the “market bubble.” Instead, focus on the businesses you have invested in. Munger’s statement here reminds us of something Buffett wrote to Berkshire shareholders years ago: “Our favorite holding period is forever.” He has a condition for long-term holdings, however: the underlying businesses and their management teams must be “sophisticated.”

5. “Nothing is 100% certain when investing. Therefore, it is risky to use it.”

Investing by its very nature comes with risks, and you should be aware of the amount of risk you are taking with any investment. Munger warns that using leverage (to invest more of your money) can greatly increase your risks.

6. “You don’t need to own a lot of things to be rich.”

This statement echoes what Buffett wrote in a recent letter to Berkshire shareholders: “Our satisfactory results are the result of nearly a dozen good decisions.” Buffett has revealed his “secret sauce” for success in investing: “When the flowers bloom, the weeds wither with necessity.” The “weeds” are stocks that underperform, while the “flowers” are stocks that make big gains. “It only takes a few winners to do amazing things over time,” Buffett said.

7. “If you want to be a great investor, you have to keep learning. You have to change as the world changes.”

Menger is 99 years old. Buffett is 92. The world is very different now than when you started investing. Their ability to be successful long-term is largely due to their willingness to keep learning and adapting.

Bonus: An investment tip from Buffett

In addition to the seven listed above, Buffett included several other quotes from Munger in his letter to Berkshire shareholders. He also added a tip of his own: “Find a very intelligent, high-level partner — preferably a little older than you — and then listen carefully to what he has to say.” Buffett took that advice to heart in his relationship with Munger — and it made him rich over the years.