In this interview with CNBC, Mohnish Pabrai discusses some of the best lessons he learned from Charlie Munger. Munger emphasized the importance of concentration and big bets in investing. He believed that great investment ideas are rare and should be acted upon decisively when they arise. Pabrai advises investors to take few bets, but make them big and hold them for the long term.
Pabrai: Basically he was a big advocate of swinging for the fences when you had all the odds in your favor.
He wanted few bets, big bets, infrequent bets. So I really learned the value of concentration from Charlie.
Charlie always said that it was very rare to find great investment ideas. Maybe in a lifetime if we are lucky we may have a half a dozen truly great investment ideas.
Maybe one every five years or 10 years and when we get one of those ideas, and you know it hits us on the head with like a two-by-four basically you go all in.
You know investing is a business with a high error rate. The best of us are going to be wrong half the time, but you know something that is even a 10 or 15% position could end up being a 50 bagger, 100 bagger and so you know it doesn’t matter what’s in the rest of the portfolio if you just hold on.
And so those were some of the important lessons, you know basically spend the time to understand the business extremely well. Make sure you’re within your circle competence, and then don’t be shy.
You can watch the entire discussion here:
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