Charlie Munger is a close friend of Warren Buffet and Vice-Chairman of Berkshire Hathaway. He follows the same tactics of value investing that Buffet does. In the 60s and 70s he ran his own successful fund before becoming part of Buffet’s empire.
1. Read everything you can
This a simple principle that we can all agree with. Reading everything you can is the best way to learn as much as you can. It’s important that we proactively seek out new ideas and evaluate the things we think we know.
Don’t read what you’re given – seek out as much information as you can, even if it proves you wrong. Any investment where the details are kept from you is a bad investment. Remember: education is a constant process.
2. Rise above greed and envy
Greed and envy come into play when we see someone else’s investments performing better than ours. If an investment returns 25%, we would say that was a good year. But if we compare it to our friend’s miraculous 300% return, we might become envious. This could cause us to chase that sort of return and make costly decisions.
In the end, a 25% return is a good year and we should have been happy with that. Banish envy of other people’s portfolios and approach yours with cold, calculating reason.
3. All investment evaluations should begin by measuring risk
Risk, simply, is your likelihood of losing your investment. High risk may be acceptable depending on your investing goals, but for us, risk is anathema; we look for ways to drive it down. One of the great things about real estate is that it’s far more risk averse than other investment vehicles; regular dividends and a tangible asset mean you’re protected even after most catastrophes.
4. Have intellectual humility
Wise men readily admit what they don’t know. It’s quite alright to say, “I’m a doctor (or lawyer, or accountant, or whatever you are) and I don’t know about investing.” That actually puts you in a stronger investment position than the amateur investor who dives in without understanding the industry. The amateur is gambling. For the same reason your clients come to you, it’s smart for you to seek out someone to manage your investments.
5. Never fall in love
It’s easy to fall in love with an investment. Maybe you’re attached to it in some way (like it was your brother-in-law’s find and you don’t want to let him down), you’ve worked really hard to build it (like that rental property that could never keep a tenant), or it’s something you researched for months. You have to be situation-dependent and opportunity-driven. If something isn’t working, cut your losses.
Written by Mark A. Mascia, President and CEO of Mascia Development
Mark manages the investment and operating activities of Mascia Development, a diversified value real estate investment firm that acquires, owns and manages retail, medical office, family offices, multi-family, and industrial real estate properties in the most promising long term growth areas nationwide. Through crowdfunding, they create powerful real estate opportunities for high net worth individuals.
A fully integrated real estate company, Mascia Development has in-house capabilities in acquisitions, financing, re-development, and construction; and their principals have experience in property and portfolio management, leasing, and maintenance.
Mark has a strong career in real estate, previously managing a property of portfolios valued over $1.1 billion. Mark has worked at Archstone-Smith (a former publicly traded REIT) and Monument Realty, one of the largest office real estate developers in the Washington, DC metro area. Mark teaches real estate development and finance at New York University.
For more information, visit www.masicadev.com.
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