Charlie Munger's wisdom on crisis was profound.

The big money is not in the buying and selling, but in the waiting

Charlie Munger:   Own things you understand. Maintain adequate liquidity and let compounding do the heavy lifting.

Charlie Munger's wisdom on crisis was profound. "The big money is not in the buying and selling, but in the waiting" What he meant is patience is the investor's greatest asset. You wait for the right pitch. You wait for a crisis when prices are attractive, then you swing hard. Charlie also believed that most of what passes for sophisticated investing is actually just sophisticated gambling. He had no patience for complexity, for trading, for trying to be clever. He believed in buying wonderful businesses at fair prices and holding them forever. During crisis, Charlie would remind Buffett to think about what the business will look like in 10 years, not what the stock price will do tomorrow. He'd say, "If you are not willing to own it for 10 years, don't own it for 10 minutes."

Focus on business fundamentals rather than market gyrations

That perspective kept them focused on business fundamentals rather than market gyrations. Charlie Munger also understood the value of inversion. Instead of asking how do I succeed, he'd ask how do I fail? Then, he systematically avoid those failure modes. For crisis the failure modes are obvious. Using leverage, panicking and selling at the bottom, speculating rather than investing, trying to time things perfectly. Avoid those mistakes and you will do just fine.

Never interrupt your compounding unnecessarily

One more thing Charlie taught Buffett. The first rule of compounding is to never interrupt it unnecessarily. Every time you sell during a panic, every time you switch strategies, every time you try to get clever, you interrupt your compounding. The people who get wealthy are the ones who set up a sensible strategy and then stick to it through multiple market cycles.



After you build your first million ....

If you build your first million, congratulations, you have done something many have never achieved. You have developed the discipline, the temperament, and the knowledge that separates successful investors from everyone else. Now your opportunity is to accelerate your journey to your second million by capitalizing on crisis. And, crisis will come. They always do. The question is whether you'll be prepared to take advantage or whether you'll panic like everyone else.

Take advantage of crisis

The 3 strategies shared by Buffett:

• Buying wonderful companies at crisis prices
• Upgrading your portfolio during dislocations
• Building cash before the storm to deploy during the panic.

These are not complicated, but they require discipline, patience, and courage. They require discipline to build cash during the good times when it feels like you're missing out. They require patience to wait for the right opportunities rather than chasing everything that moves, and they require courage to act when everyone else is paralyzed by fear.

If you can do these things, if you can stay rational while others panic, if you can see crises as opportunities rather than disasters, you can build your second million much faster than you built your first.


Crises accelerate the transfer of money from the impatient to the patient by the stock market

Remember, the stock market is a device for transferring money from the impatient to the patient. Crises accelerate this transfer. The impatient panic and sell at the bottom. The patients stay calm and buy at the bottom. Over time, this difference compounds into enormous wealth. The next crisis is your opportunity. Prepare now, by building cash.