5 Habits Warren Buffett & Charlie Munger Recommend To Build

Read Time: 5-minutes

A big thank you to our sponsor for helping keep this newsletter free to the reader:

Money Wisdom focuses on the engine behind your investment portfolio: your income, spending, & savings habits. Money Wisdom shares top money strategies, principles, & frameworks to help you grow your investment portfolio and achieve financial freedom.

Today, we're going to look at 5 habits that Warren Buffett and Charlie Munger recommend to build.

While we're anchored by poor habits, building positive habits compounds our efforts and gives us confidence in our investing process. And consistently doing these habits over time makes all the difference:

So, let's dive in.

#1 Read…A Lot

Simply put, the best investors read. A lot:

Warren Buffett gave this advice to students at Columbia University in 2001.

One of the students took Buffett seriously: He built the habit of tracking & reading 500 pages per week.

He did this for years, while managing his own investing fund.

Eventually, the former student decided to contact the assistant of another of his investing idols: Charlie Munger.

To his surprise, he was able to get a meeting with Munger. The two hit it off—talking for over 6 hours. His knowledge from reading impressed Munger so much Munger eventually introduced him to Warren Buffett.

Today, that Columbia student—who took Buffett’s reading challenge seriously— manages tens of billions of dollars for Buffett and Berkshire Hathaway.

His name: Todd Combs.

Perhaps start with however many pages per week seems realistic. Then slowly work up to 500.

#2 Teach To Understand

Beyond accounting, there are quite a few broad topic areas to understand even the fundamentals of investing:

• Economics

• Corporate Finance

• Portfolio Management

• Financial Statement Analysis

And the best way to learn these may be counterintuitive:

Teach them.

Nobel prizewinning physicist Richard Feynman:

If you can explain ideas simply enough so that others can understand them, then you truly understand them.

#3 Scheduled Thinking

The funny thing about thinking is that it can look like you're not doing anything, if anyone is around.

But as Munger & Buffett mentioned above, deliberate and focused thinking does 2 things: creates upside and minimizes downside.

Yet, the obstacles today keeping us from having quiet time to think are more abundant than ever: social media, phone notifications, financial news networks—the list goes on.

How do you get around this?

2 ideas worth considering:

1. Schedule time to think: usually, the only way something gets done is if it's on our calendar.

2. Take a walk: think while you're walking so you don't feel the social pressure from roommates or family as you're contemplating important ideas.

#4 Journal To Clarify

Writing down your thoughts is a litmus test for clarity and understanding:

Putting your thoughts into words allows you to distance yourself from them and evaluate if what you're thinking really makes sense.

If you're skeptical, give it a shot on a new idea you're contemplating. See how easily (or not) your thoughts flow into your journal.

Developing a journaling habit also allows you to:

• Look back and review your thoughts over time to find insights for future investments.

• Document your lessons, to avoid making future mistakes.

A lot of upside, with little downside—journaling is a habit worth developing.

///

If you’re reading this, you’ve made it quite a ways, so you’re probably finding this valuable. Join others who get The Saturday Shareholder automatically sent to their email every Saturday. Join free here.

///

#5 Get Feedback From A Partner

It's well known that Charlie Munger was Buffett's right-hand man. His thinking partner that helped keep his thinking in check.

As important as finding a thinking partner is making sure whoever we do find is not a "Yes, man." We need someone comfortable calling us out for faulty thinking.

Ideally, we need to find someone like Munger, who was unabashedly so:

BONUS: Exercises To Stay Calm & Objective

As much as we'd like to always be emotionless and perfectly rational, it's pretty unreasonable to expect we always will.

So, it probably makes sense to develop a habit that maintains our calm. Our stillness.

Investor Ray Dalio attributes nearly all of his success to his meditation practice:

So, regular breathing exercises may be just what we need. But if breathwork doesn't sound appealing, maybe it's yoga, hiking, or some other practice.

Whatever the case, it's worth experimenting to find out what works best for you.

So you can always be calm, objective, & ready to take advantage of emotions in markets—rather than be susceptible to them.

Conclusion:

Those are 5 habits Buffett & Munger recommend. Let's recap:

1. Read…A Lot

2. Teach to Understand

3. Schedule Time to Think

4. Journal to Clarify & Learn Lessons

5. Get Feedback from a Partner to Test Your Thoughts

And a Bonus: develop a meditation habit or similar exercise to stay calm & objective.

Well, that's all for this week.

I hope you found it valuable.

See you next Saturday.

Two resources I think you might like:

1. Book Summaries: One of the most important lessons from Charlie Munger is to strive to become a little bit wiser each day. To accelerate my learning on everything from investing & decision-making to negotiating & habit-building, I use Blinkist (I don't receive any compensation from Blinkist currently). Blinkist offers easily readable book summaries to help you get the most valuable ideas from the most popular books. You can check out Blinkist here.

2. Mental Exercises: To paraphrase Morgan Housel, the common factor among elite investors is they have complete control over the space in between their ears. Financial news networks and social media can create a lot of "noise" for investors. To stay focused and calm, I like to use Headspace (I don't receive any compensation from Headspace currently). Headspace offers mindset and breathing exercises to help you keep control over the space between your ears. You can check out Headspace here.

Disclaimers

This material is not investment advice. No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading this material can be accepted by the publisher. Additional disclaimers here.