Charlie Munger: Think about your best opportunity cost

“The concept that you’re likely to find just one thing where it will make 20 percent per annum and you just sit back for the next 40 years, that tends to be dreamland. And in the real world, you have to find something that you can understand that’s the best you have available. And once you’ve found the best thing, then you measure everything against that because it’s your opportunity cost. That’s the way small sums of money should be invested. And the trick, of course, is getting enough expertise that your opportunity cost — meaning your default option, which is still pretty good — is very high… Most people aren’t going to find thousands of things that are equally good; they’re going to find a few things where one or two of them are way better than anything else they know. And the right way to think about investing is to act thinking about your best opportunity cost.”

—Charlie Munger.

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