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How Charlie Munger Outperforms the Stock Market Using This Simple Strategy (His #1 Investing Tip)
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How Charlie Munger Outperforms the Stock Market Using This Simple Strategy (His #1 Investing Tip)
In this video, I want to talk about Charlie Munger’s investment philosophy and how he and Warren Buffett achieved their impressive track record.
Charlie Munger and Warren Buffett achieved an impressive compounded annual return of roughly 20% since buying Berkshire in 1965. If you invested $1,000 in Berkshire Hathaway right at the beginning of this wonderful journey in 1965, your investment would be worth $18 million today. And if you invested $1,000 in 1990, that investment would be worth almost 50x your initial investment, almost 50,000 dollars. Over the same time period, the S&P 500 has recorded a annualized return of roughly 10%.
This highlights the value of outperforming the market over a long period of time as the power of compound interest starts to kick in. In my view, following Berkshire vice chairman Charlie Munger's simple investment strategy likely increases your chances of beating the S&P 500 over the long run.
Munger's recipe for his success was doing less. Successful investing is counterintuitive. In many areas of life activity and action is what moves the ball forward. Activity usually gets rewarded. But in investing, the more you do, the worse the outcome! There is a psychological bias called the action bias which describes the tendency to favor action over inaction.
What matters is to wait for the right investing opportunities and hold on to your cash position as long as there are no attractive investment opportunities. But it is difficult to hold cash and wait for the best investment opportunities to come along when stock prices are rising and everyone else seems to be making money. Especially in recent years, the stock market has enjoyed the longest bull market in history.
The Daily Journal is a great example showing that inactivity can work wonders. If we just consider what Charlie Munger has done over the course of the last 10 years, we can see that he did almost nothing and only owns 5 securities. Munger invested big money during the financial crisis but ever since he has been patiently waiting for another investment opportunity, which he might have found in Alibaba quite recently. But clearly, Munger is doing very little.
WATCH NEXT:
YOU CAN ALSO FIND ME HERE:
OTHER LINKS:
○ The Charlie Munger interview / clip is taken from the 2019 Daily Journal (DJCO) meeting
MUSIC:
Chapters:
0:00 Intro
1:03 Munger & Buffett's outperformance
2:21 What Warren Buffett learned from Charlie Munger
6:04 How Charlie Munger outperforms the market
8:19 Why investing is counterintuitive
10:47 Action bias in investing
13:08 Charlie Munger's transactions in recent years
DISCLAIMER:
The content provided on this channel should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed on this channel are examples only and may not be appropriate for your individual circumstances.
Before making any financial or investment decisions, I recommend you consult a financial planner or advisor to take into account your personal investment objectives, financial situation, and individual needs.
In no event shall René Sellmann be liable to any viewer for any damages of any kind arising out of the use of any content published on this channel, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.
I hope you enjoyed the content!
In this video, I want to talk about Charlie Munger’s investment philosophy and how he and Warren Buffett achieved their impressive track record.
Charlie Munger and Warren Buffett achieved an impressive compounded annual return of roughly 20% since buying Berkshire in 1965. If you invested $1,000 in Berkshire Hathaway right at the beginning of this wonderful journey in 1965, your investment would be worth $18 million today. And if you invested $1,000 in 1990, that investment would be worth almost 50x your initial investment, almost 50,000 dollars. Over the same time period, the S&P 500 has recorded a annualized return of roughly 10%.
This highlights the value of outperforming the market over a long period of time as the power of compound interest starts to kick in. In my view, following Berkshire vice chairman Charlie Munger's simple investment strategy likely increases your chances of beating the S&P 500 over the long run.
Munger's recipe for his success was doing less. Successful investing is counterintuitive. In many areas of life activity and action is what moves the ball forward. Activity usually gets rewarded. But in investing, the more you do, the worse the outcome! There is a psychological bias called the action bias which describes the tendency to favor action over inaction.
What matters is to wait for the right investing opportunities and hold on to your cash position as long as there are no attractive investment opportunities. But it is difficult to hold cash and wait for the best investment opportunities to come along when stock prices are rising and everyone else seems to be making money. Especially in recent years, the stock market has enjoyed the longest bull market in history.
The Daily Journal is a great example showing that inactivity can work wonders. If we just consider what Charlie Munger has done over the course of the last 10 years, we can see that he did almost nothing and only owns 5 securities. Munger invested big money during the financial crisis but ever since he has been patiently waiting for another investment opportunity, which he might have found in Alibaba quite recently. But clearly, Munger is doing very little.
WATCH NEXT:
YOU CAN ALSO FIND ME HERE:
OTHER LINKS:
○ The Charlie Munger interview / clip is taken from the 2019 Daily Journal (DJCO) meeting
MUSIC:
Chapters:
0:00 Intro
1:03 Munger & Buffett's outperformance
2:21 What Warren Buffett learned from Charlie Munger
6:04 How Charlie Munger outperforms the market
8:19 Why investing is counterintuitive
10:47 Action bias in investing
13:08 Charlie Munger's transactions in recent years
DISCLAIMER:
The content provided on this channel should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed on this channel are examples only and may not be appropriate for your individual circumstances.
Before making any financial or investment decisions, I recommend you consult a financial planner or advisor to take into account your personal investment objectives, financial situation, and individual needs.
In no event shall René Sellmann be liable to any viewer for any damages of any kind arising out of the use of any content published on this channel, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.
I hope you enjoyed the content!
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