Charlie Munger is the billionaire extraordinaire who wears many hats, including being the director of Daily Journal Corp. and the longtime vice chairman of the legendary Warren Buffett's holding firm Berkshire Hathaway Inc. His decades-long experience in investing and finance makes him a force to be reckoned with.
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Munger has some advice for young investors who are looking to make their mark in the world of finance. He's warning the latest batch of college grads that getting rich and staying that way might be tougher than it used to be. According to Munger, two significant hurdles stand in the way of young people trying to get and stay rich: inflation and skyrocketing real estate prices and the increasingly complex nature of investing.
Real estate: According to Munger, the days of a one-size-fits-all investment strategy are long gone, thanks to the staggering rise in real estate prices over the past few decades. Back in 1980, when Munger first took the reins at Berkshire, the median price for a house in California was $80,055. Adjusted for inflation, that would be around $275,600 today. But fast forward to 2023, and the median house price in California has skyrocketed to around $800,000.
Munger cautions that the tried-and-true investment strategy of owning a diversified portfolio of common stocks may not be as foolproof as it once was. He predicts that today's investment landscape is going to be more challenging than it was for previous generations.
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Complex investing: The billionaire suggests getting personalized investment advice to help navigate today's complex investment climate. Munger notes that investors should consider their own skill level or the level of skill their adviser has before making any major investment decisions. For those who find investing difficult and confusing? As Munger puts it, "Welcome to adult life!"
Today's investment environment is significantly different from that of the 1980s. Now, anyone can invest in a wide variety of traditional and alternative investments from their smartphone. Anyone can invest in real estate and startups for just a few hundred dollars.
Munger used to recommend holding a diversified portfolio of common stocks to earn an intelligent investor roughly a 10% return, but he admits that it's no longer a sure-fire tactic.
“I don't think the future will offer the young person coming out of college this year such an easy investment opportunity,” Munger said.
But all is not lost. Munger's friend and Berkshire Hathaway CEO Warren Buffett offers a gateway to the investment world, advocating for investing in funds to avoid complexity.
Patience is key, though, as the S&P 500 has experienced some volatility in recent times — it’s down 5% since the beginning of 2022. But Munger and Buffett's investing success has been built on patience, so following their examples and taking a long view may be the best strategy.
Although even the best investors are sometimes wrong, Munger's latest words of wisdom are particularly noteworthy for young investors facing an uphill battle in today's investment climate.
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