Warren Buffett’s business partner, Charlie Munger had a guiding philosophy on checklists: “No wise pilot, no matter how great his talent and experience, fails to use his checklist.”
Investing is no different. A good checklist removes the need for daily judgement calls, takes emotion out of the equation, and replaces gut feel with process. That is the same idea I built my next book, Wealth by Design around. Wealth building is not really an information problem. It is a behaviour and process problem. Evidence-based rules, run consistently for decades, beat opinions every time. They protect you from your own emotions in volatile markets, and they give you a simple test for any new piece of advice: does it align with the rules, or not?
Munger left us with ten investing principles. They are deceptively simple and applying them well takes a lifetime. In this blog, I want to walk through each one and translate it into something practical for Australian investors.
1. Risk, start with the downside
Munger told us to begin every evaluation by measuring risk. That sounds abstract until you look at what Australian investors are pitched on a typical week: SMSF property in regional towns, off-the-plan apartments with two-year rental guarantees, “high-yield” private credit funds, thematic ETFs riding the latest narrative. Each one carries a downside that is rarely highlighted in the marketing material.
Before you ask, “what could this return?”, ask “what could this lose, and what would that loss say about my judgement?” Reputational risk in this context is the risk of looking back in ten years and being unable to defend the decision, even to yourself. The rule is simple: if a strategy cannot survive an honest pre-mortem, it should not get your capital.
2. Independence, stop borrowing other people’s conviction
Munger reminded us that only in fairy tales are emperors told they are naked. In investing, the consensus is often most dangerous at the extremes.
In Australia, conflicted advice is not uncommon. Buyers’ agents may promote certain locations, projected returns, or investment strategies. Active fund managers often present a compelling investment thesis. Industry-funded reports forecast asset class returns with an air of authority. Industry super funds promote they exist only to serve members. None of this means the advice is wrong. But it does mean investors must recognise the incentives behind the message.
We see this regularly in property and investment markets. It might be the flavour of the month, buying high-yield commercial property in regional towns, the lure of fully franked dividend income, or the belief that the big four banks are inherently safe at almost any price. Each of these ideas has sounded sensible at various points in the cycle. Each has also been a perfectly good way to lose money when prices, risks, or assumptions were wrong.
Independence does not mean being contrarian for the sake of it. It means doing your own work, applying evidence-based rules, and being willing to sit out when the crowd is excited and the price is high. If your conviction is borrowed, it will not survive a 30% drawdown.
3. Preparation, the only edge available to most investors
“The only way to win is to work, work, work, and hope for a few insights.”
The best defence against making poor financial decisions is education.
That does not mean you need to understand every technical detail of financial planning, tax, lending, superannuation, or investing. You should lean on good advisers for important decisions. But you do need enough knowledge to ask better questions, test assumptions, and recognise when something does not make sense.
Most financial mistakes occur because people lack knowledge and experience. Sometimes the greater risk is having a little knowledge, because it creates confidence without competence – often called unconscious incompetence.
The good news is that most financial concepts are not difficult to understand when they are explained well. You do not need a natural flair for finance. Almost every important concept can be explained using basic logic and/or simple maths. AI tools make it easy to get simple explanations of financial concepts before speaking with an adviser. That does not replace advice. It makes the advice more valuable, because you are better prepared.
Education is not about becoming your own adviser. It is about becoming an informed decision-maker. Once you understand the basics, good financial decisions become easier, because you are less likely to be seduced by a compelling story.
4. Intellectual humility, know the edge of your knowledge
Munger said acknowledging what you do not know is the dawning of wisdom. This is the rule most often broken by intelligent people, and it can be very expensive.
Arrogance is not only an unattractive personality trait. It is also one of the riskiest weaknesses an investor can have. The saying “hold strong opinions loosely” is a useful reminder. You should have conviction in your views and decisions but remain open to the possibility that you are wrong, or that the facts may change.
A surgeon, barrister, or executive earning a strong income is not, by virtue of that income, an investment expert. The skills do not automatically transfer. In fact, confidence often makes things worse. I see this regularly. High earners take on concentrated positions, complex trust structures, or active stock-picking because they assume their professional intelligence will translate into investment skill. It rarely does.
The honest answer is usually, “I do not know which asset class will perform best next year, and neither does anyone else.” Once you accept that, a rules-based, evidence-based approach stops feeling like a compromise and starts looking like the only sensible default.
Humility is one of your greatest advantages as an investor.
5. Analytical rigour, use the scientific method, not stories
Evidence-based investing has a few non-negotiable characteristics. It leans on long-term data across multiple cycles. It is simple enough to explain with basic arithmetic. It can be expressed as clear rules that can be followed year after year. And it does not depend on one person’s hunches or opinions.
For Australian share investors, that points squarely at low-cost, rules-based index funds across multiple indices, with broad global diversification, and away from active managers, factor-of-the-year ETFs, and thematic bets. For property investors, it points to investment-grade assets in established locations with structurally strong demand and constrained supply, and away from speculation in mining towns, oversupplied new apartment markets, or anywhere that depends on a future infrastructure announcement to make sense.
The discipline is not about being clever. It is about insisting on evidence before you act.
6. Allocation, the investor’s number one job
Munger called proper allocation of capital the investor’s number one job, and he was right. The only thing we truly control as investors is where we allocate our capital. That makes it our most important decision.
For most Australians, this is not simply a choice between growth and defensive assets. The more useful question is how much capital should be allocated to geared versus ungeared assets, and to property versus shares. Either property or shares can be geared or ungeared, so these decisions need to be considered separately.
It is also important not to confuse superannuation as an investment option. Super is merely an ownership structure. What matters is what your super is invested in.
Investors that buy the wrong properties, asset classes, or share funds are unlikely to generate an acceptable long-term result, irrespective of ownership structure, funding, tax treatment, or any other factor. The allocation decision deserves more attention than almost any other decision, because it has the greatest influence on long-term outcomes.
7. Patience, the human bias to act is the enemy
Munger told investors to resist the human bias to act. That bias is amplified in Australia by daily property news, weekend auction clearance rates, every RBA cash rate decision, and a 24/7 financial media looking for content.
Patience, in practice, looks dull. It looks like buying an investment-grade property and holding it for 30+ years. It looks like dollar-cost averaging into the same diversified ETF portfolio for 240 months in a row. It looks like ignoring the suburb that just had a stellar year, or the shiny new object.
The maths is uncomfortable but unavoidable. Most of your wealth will be created in the last decade or two of your investing life, when compounding finally does the heavy lifting. If you keep changing strategies, jumping between products, or chasing what just outperformed, you forfeit that final, exponential leg. Patience is not inaction. It is a competitive advantage.
8. Decisiveness, when the setup is clear, act
Patience is one half of the rule. Decisiveness is the other.
When the right circumstances present themselves, you must be willing to act with conviction.
For most Australians, this rule is important in two common situations. The first is when investment markets fall sharply and the headlines are uniformly negative. In theory, most investors say they would invest more during these periods because expected long-term returns are usually higher. In reality, it feels very different when you are living through it. That is why you must prepare yourself psychologically in advance. The opportunity will probably feel least attractive at precisely the time it is most valuable.
The second situation is buying property. Property is a large, lumpy asset, so there is almost always a reason to delay. This applies whether you are buying your first home, upgrading your family home, or purchasing an investment property. But the evidence is clear. Over the long run, what you buy, the quality of its underlying attributes, and how long you hold it matter far more than trying to perfectly time the purchase.
Decisiveness is not recklessness. It is the discipline to follow your own rules when others are paralysed.
9. Change, accept the complexity you cannot remove
Munger told investors to accept unremovable complexity. The world is not stable. Tax rules will change. Interest rates will move in cycles you cannot forecast. State governments will tighten tenancy laws and lift land taxes. Markets will deliver decade-long stretches that look nothing like the prior decade.
You cannot eliminate any of this. You can only design a plan that is robust to it. That means broad diversification across asset classes, geographies, and ownership structures. It means avoiding excessive gearing and avoiding concentration in a single property, sector, or investment theme. It means holding cash buffers, so a bad year does not become a forced sale. And it means reviewing your plan annually without rebuilding it every time the news cycle shifts.
The investors who do best are rarely the ones who predicted the change. They are the ones whose plans did not need a prediction to survive it.
10. Focus, keep it simple and remember why you started
Munger’s final rule is to keep things simple and focus.
The main goal of investing is to maximise long-term returns over multi-decade periods, while taking the least amount of risk necessary to achieve your financial and lifestyle goals.
The goal is not to avoid volatility. It is not to maximise returns over the next one or two years. And it is certainly not to get rich overnight.
When you focus on long-term outcomes, you naturally focus on the things that matter most: asset quality, starting valuation, diversification, leverage, cash flow, tax, costs, and time in the market. In the short run, markets are driven largely by sentiment. In the long run, fundamentals eventually win.
Investing should not be exciting or entertaining. Done well, it is usually quite boring. In the early years, it can feel like you are not making much progress. That is simply how compounding works. The greatest benefits tend to arrive later, after the foundations have been in place for a long time.
This long-term focus also helps you correct mistakes quickly. If you realise you have made a poor investment decision, do not defend it just because you made it. As the saying goes, if you find yourself digging a hole, stop digging.
The four things underneath all ten rules
Munger’s ten rules ultimately distil into four behaviours: preparation, discipline, patience, and decisiveness.
That is also the backbone of Investopoly and my next book, Wealth by Design (which you can preorder now). Decide where you are going. Build a savings engine that runs on autopilot. Choose evidence-based growth assets. Hold them for decades. Manage risk. Review your strategy on a sensible cadence.
None of this is intellectually difficult. The hard part is doing it consistently while the world tries very hard to distract you, tempt you, or talk you out of it.
That is why a checklist is so valuable. Its purpose is not to make you smarter. It is to keep you making good decisions long after the initial enthusiasm has worn off.
So, my advice is simple: follow this billionaire investor’s 10-point checklist.
