I bought this book by mistake, originally I wanted to read it is actually poor Charlie's general knowledge, but after reading it, I think it's not bad, although it's a discussion of the principles, but it's also worthwhile for those who already have experience in investing to use it to compare with their own investment criteria and insights.
Charlie Munger is Warren Buffett's partner and has written several books, this one on investment principles. The main concept is the safety margin. The concept of safety margin basically means that if the valuation is overvalued, it can still be higher after subtracting the safety margin. The concept of margin of safety basically means that if the valuation is overvalued, as long as it can still be higher than the purchase price after subtracting this margin of safety is a good investment, that is, a certain kind of steady profit but not the concept of loss.
The concept of valuation mongering here is intrinsic value. Subjectively, intrinsic value is the value that an insider would be willing to pay after a thorough investigation, whereas objectively, mathematically, it is mostly realized as the present value of future cash flows. As mentioned in the appendix, Monger likes to use the net earnings per share/share price, that is, how much each dollar can net, compared with the opportunity cost, as a benchmark. I think simply put, if I go to do risk-free investment such as fixed deposits can get 1%, at least this figure should be higher than 1%. and the risk part, use the safety margin to deal with.
Margin of safety sounds good, but how do you decide? Because every case is different, this is an area that requires personal judgment on the part of the investor. It depends on the nature of the company and the so-called moat, or the durability of the advantage, which is more difficult to quantify. I think that's why Monger also talks about the importance of mindset models. There are many different kinds of thinking models, and Monge encourages more of them, the better. I think this is actually encouraging people to learn more and use different knowledge points to understand the business. Not just mathematical modeling, but also using various disciplines to increase our understanding of the business itself, so that we can see its value (of course, the quantification of some of the last things may be a bit subjective). In short, when investing, we build our own framework and checklist to determine whether a company has value and safety margins worth considering. Because subjective judgment is a big part of the equation, if you don't understand or have doubts about a business, don't enter it lightly.
In one of the paragraphs, I think we are not only talking about investing, but also about recognizing and acting as a human being. This is related to investment, probably because it is necessary to recognize good managers and business related people, and it is also necessary to control the investor's own mentality and ability. In terms of personal mindset, I think the main principles can be simplified as prudence, calmness, diligence, and passion for learning and maintaining relationships. After all, there are a lot of hard-to-quantify parts of the equation that require experience and learning in order to be a good investor.
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