• Munger sees high house prices as a barrier to wealth creation
• Munger: The investment landscape has become more complex – this is how you can react
• Buffett recommends investing in a broad stock mutual fund
Charlie Munger is one of the most famous investors in the world. Born in 1924, Munger attended the University of Michigan and Harvard Law School before becoming a successful attorney. He later moved into investment management and eventually teamed up with Warren Buffett in 1959. He has been vice chairman of investment holding company Berkshire Hathaway since 1978 and is considered – after Buffett – the most important architect of Berkshire’s impressive performance.
Munger is known for his sharp mind, quick thinking and unyielding discipline when it comes to investing. Many investors also appreciate him for not mincing his words – he criticized Bitcoin as “rat poison” or described the crash in the shares of the neo-broker Robinhood, which he extremely disliked, as “fair”. Munger is a man of clear words and firm principles, especially when it comes to investment decisions. His advice is therefore always heard in the investor community. He recently gave these tips to young investors, the so-called Generation Z. This group usually includes those born between 1997 and 2012.
Munger: The enormous increase in real estate prices is a problem
Munger has sobering news to announce for the young generation of investors: The accumulation of capital – that is, getting rich – is becoming increasingly difficult, as BENZINGA quotes the old master. One reason for this is the stubborn inflationary pressure, which reduces the returns on any capital investment. In addition, Munger sees major problems in the rapidly rising real estate prices. Munger uses an example calculation to support his argument: In 1980, the average price for a house in California was $80,055. Adjusted for inflation, that would equate to about $275,600 today, calculates the Berkshire vice president. But in 2023, the median price for a home in California has skyrocketed to around $800,000 — an inflation-adjusted increase of a whopping 189 percent. As a result, real estate ownership is becoming increasingly difficult for young average earners without a substantial inheritance to acquire.
Munger foresees a difficult stock market future
Munger’s warning about overly high expectations applies not only to the real estate world, but also to his area of expertise, namely company shares. In his opinion, the tried-and-true investment strategy of owning a diversified portfolio of standard stocks is no longer as foolproof as it was in decades past. The stock markets have now become much more complex, there is a much larger selection of assets and individual values. Investors can now choose from millions of these options at the touch of a button on their smartphone and become active on the capital market for just a few dollars. This tempts many small shareholders to make highly speculative bets and could result in total losses – it is against this background that Munger’s sharp criticism of the neo-broker Robinhood should be viewed. What does Munger suggest to young investors? How can you best navigate through the intricate investment jungle?
Munger advises young investors to do this
The billionaire recommends personal, individualized investment advice to Generation Z in order to find their way around in today’s complex investment environment and to counteract the excessive demands. Munger cautions that investors should consider their own level of expertise or that of their adviser before making any major investment decisions. While this is often difficult and confusing, Munger assures that this experience is part of being an adult. Gone are the days when a diversified portfolio of common stocks was a “surefire tactic” and enabled an average annual return of 10 percent, Munger said. “I don’t think the future will offer such an easy investment opportunity for the young person graduating this year,” Munger said. A more detailed consideration is now necessary.
What advice does Warren Buffett give to small investors?
Warren Buffett, on the other hand, has an even more specific tip for small investors. The Berkshire CEO has often recommended investors without any special stock knowledge to invest in the US index S&P 500, for example, via a broad-based, passive equity fund (ETF). This index represents “Corporate America” and will offer a positive return in the long term – as long as investors show staying power and hold on to their investments even in times of crisis, as the investor legend repeatedly emphasizes. The congenial duo Buffett and Munger has impressively demonstrated what an important virtue patience is in the stock market. The wealth of the two billionaires is not least due to their advanced age, as this allowed the enormous compound interest effect of the excellently positioned Berkshire portfolio to take full effect.
Editorial office finanzen.net
Leverage must be between 2 and 20
No data
More news about Berkshire Hathaway Inc. B
Image Credits: Nick Webb/CC BY 2.0-by-sa, Kent Sievers / Shutterstock.com