Charlie Munger claimed that “high IQ people are terrible investors” – according to him this trait is more important than “brains”

When thinking about investing, it’s easy to get bogged down by technical jargon and complex theories. However, the late Charlie Munger, Warren Buffett’s longtime partner, had a knack for cutting through the noise with simple advice.

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In a 2005 interview, Munger said something that sticks: “Many high-IQ people are terrible investors because they have terrible temperaments. And that’s why we say that having a certain type of temperament is more important than brains.” So while intelligence is great, how you handle stress and failure might matter even more.

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Munger and Buffett are known for their no-nonsense approach to investing, which shows in their thoughts on business management and wise investing. Buffett’s style of business management is quite relaxed. According to Munger, “Warren’s way of managing business doesn’t take a lot of time. I’d bet something like half of our business operations have never had Warren Buffett set foot in them.” This reflects a larger truth: sometimes less is more, especially when it comes to micromanaging.

Their approach isn’t just about keeping things simple for simplicity’s sake; it’s about effectiveness. Munger emphasizes the importance of a broad understanding across disciplines. He says, “It’s very useful to understand all the big ideas in hard and soft science. Oh, it gives perspective. B, it provides a way to organize and store experience in your head.” This multidisciplinary knowledge helps to make better decisions in investments and business management.

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However, when it comes to actual investing, Munger and Buffett have strong opinions about how many stocks you need. They are not fans of excessive diversification. Buffett famously said, “Three great businesses will be better than 100 average businesses.” This means that finding and sticking with a few exceptional investments can often be more rewarding than spreading your money around too little.

Munger adds to this by criticizing modern investment theories. He points out the flaws in “Modern Portfolio Theory,” stating, “You can’t believe this stuff… It will tell you how to average.” For him, true investment success comes not from following any theory, but from understanding what makes great businesses and following that knowledge.

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If you want to navigate the world of investing, take a page from Buffett and Munger’s playbook: Focus on a few high-quality investments, manage them wisely, and remember that temperament can be more important than raw intelligence. It’s not about having all the answers, it’s about managing the ups and downs with a steady hand.

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This article Charlie Munger Claims ‘High IQ People Are Terrible Investors’ – According To Him This Trait Is More Important Than ‘Brains’ originally appeared on Benzinga.com

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