What crypto traders can learn from Charlie Munger – even if he hates BTC

Investor and billionaire Charlie Munger, known as Warren Buffett's right-hand man, has died at the age of 99.

Munger's family told Berkshire he “passed away peacefully this morning at a California hospital,” according to the company's Nov. 28 announcement.

Munger, who has served as vice chairman of the Buffett empire since 1978, amassed a fortune worth $2.6 billion, and was admired for adopting a sound investment and stock-picking philosophy throughout his tenure at Berkshire.

While bitcoin and cryptocurrencies are no longer favored by Munger and Buffett, who once referred to Bitcoin (BTC) as “rat poison” and “rat poison squared,” crypto traders can still benefit from Munger's lessons from 60 years of investment experience. Here are some investment strategies Munger swears by:

Only invest in what you know

Munger said Berkshire Hathaway divides stocks into one of three baskets when evaluating potential investments.

“We have three baskets for investing: yes, no, and very difficult to understand.”

The latter may explain why Munger and Buffet invested in Bitcoin and cryptocurrencies, but the underlying message is to avoid investing in the unknown.

Buffett has previously said he and Munger — both tech skeptics — were “too stupid to realize” the potential of Amazon's e-commerce business in the 1990s and belittled the company's founder, Jeff Bezos.

Nor did Berkshire invest in Microsoft or Google. “We blew it,” Munger once said, reflecting on the company's decision not to invest in Google.

Still, Berkshire held onto its familiar sectors of banking and food and beverage, posting huge gains after deciding not to invest in Bank of America, American Express, Coca-Cola Co and, later, Apple. in

Charlie Munger's formula for success is simple and perfect:

– Spend less money than you earn – Invest wisely – Avoid toxic people and toxic activities – Stay content – Never stop learning pic.twitter.com/8IiJNngsdg

— John LeFevre (@JohnLeFevre) November 28, 2023

Munger and Buffett mastered the art of valuation by asking a company's balance sheet before making an investment decision, which Munger once said was the only sane way to invest.

“All intelligent investment is value investment. […] To value the stock, you must value the business.

While blockchains and protocols cannot often be valued through discounted cash flow modeling or other traditional methods, many insights can be gained from on-chain data – from the number of daily active users and transaction volumes to total value locked (from market cap) and net inflows and outflows, to name a few. To mention.

Temperament, not IQ, is a major contributor to investment success

Munger has never been one to jump headfirst into a new trend, preferring to stay on the more conservative side of investing.

He previously said that many “high IQ” people are terrible investors because they have terrible personalities. On the other hand, “big investors” choose carefully and think about it:

“Great investors are always very careful. They think things through. They take their time, they are calm, they don't rush, they don't get excited. They just follow the facts, and they know the value. And that's what we try to do.”

“You have to keep raw irrational emotions under control,” Munger said in another comment.

RELATED: Charlie Munger Says Bitcoin Is A ‘Disgusting' Product That Came Out Of Thin Air

Munger, who has been in the investment industry for more than 60 years, says patience is key when building wealth.

“The biggest money is not in buying or selling, but in waiting.”

Build a sense of guilt and stomach upset

Munger has seen Berkshire's investment portfolio fall over decades, including the 1987 Black Monday crash, the 2007-2008 financial crisis and, more recently, the Covid-19 pandemic.

He once emphasized that long-term investors should learn to stay away from their investments when unfavorable macroeconomic conditions cause market crashes.

“If you're not willing to respond equanimously to a 50% drop in market value two or three times in a century, you don't deserve to be a shareholder and you deserve the mediocre results you get.”

“There's going to be a lot of pain and other times that will escalate,” Munger said in a separate comment. “You just have to learn to live with them.”

Charlie Munger has passed away.

RIP to the legend

— Pomp (@Apompliano) November 28, 2023

Munger was born on January 1, 1924 – meaning he passed away 34 days shy of his 100th birthday.

“Berkshire Hathaway would not have been able to grow to where it is today without Charlie's inspiration, wisdom and involvement,” Buffett said in a statement.

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