During his most recent Daily Journal Meeting, Charles Munger discussed why you should invest 200% of your net worth in a stock if the opportunity is great enough. Here’s an excerpt from the meeting:
Well yes it’s true. I operated with no leverage for long stretches of my old age and Warren’s the same way. And recently I did use a little bit of leverage here and in another place because the opportunities were so ridiculously good I thought it was desirable to do that.
So you’re right, it’s unusual for us but we did find a few things. And by the way, if you go back early in my career, I use some leverage, I sometimes ask myself a mental question.
I say, what is the appropriate percentage of your net worth you should put in the stock if you think it’s an absolute cinch. Well, if you’re the kind of fella who’s right when you think something is a cinch, the answer is 100%, or maybe 150%.
But nobody teaches people to think that way in finance. But if the opportunity is great enough the logical answer is 100%, or maybe 200%.
You can watch the entire discussion here:
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