A quick recap of the timeless investment wisdom of the late Charlie Munger, Berkshire Hathaway's renowned Vice Chairman, as we reflect on his teachings about the virtue of patience.
Can sitting tight with your investment portfolio truly outperform the frantic dance of buying and selling in today's market?
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Thanks for Listening!
Jonathan
Speaker 1:
The big money is not in buying and selling, but in waiting. This is a quote by Charlie Munger, who was the vice chairman of Berkshire Hathaway. Berkshire Hathaway is a conglomerate of companies that is run by Warren Buffett and was also run by Charlie Munger. Charlie passed away in November of 2023. But I thought that his quote really exemplified the power of compounding and how this can be impactful for your retirement and your longevity, so that, as you continue to live and move into retirement, you've got money to provide for your retirement lifestyle. From 2000 to the end of 2023, there were seven negative years in the market and there was two other years that were barely positive. And trying to figure out what years are going to be good and what's going on with all these geopolitical events and is this an election year there is a bunch of noise and when you're trying to base investment decisions based on random events that you think might be impactful maybe wrong, maybe right, but a total guess and this chart by macro trends really shows that it's really hard to predict what's going to happen in the market and when it's going to happen. Again, seven negative years there was three in a row. That was when the dot-com bubble bust, we had 9-11 attacks and then we had a period of growth. We had the financial crisis, we had another period of growth, we had the COVID and then in 2022, we had a big decline as the Fed raised rates, and so it's really hard to predict what's going to happen on a day-to-day, week-to-week, month-to-month and near-to-year basis. But when you can look at and follow your investment policy statement, have a foundational portfolio and a foundational strategy when you're making investments, then allowing this money to work long-term can be really beneficial. So I'm going to flip to another image here that really reinforces what Charlie Munger says in that quote, which again says the big money is not in the buying and selling but in the waiting. I'm going to pull up another image here, and what that says is the stock market returned between 2000 and 2023. So if you invested $100,000 in 2000, that would be worth $488,000 at the end of 2023. So this would be a return of up 388% or just shy of 7% a year. So you're factoring in three really bad years to start out 2000, 2000, more in 2002. And then you had the financial crisis, you had COVID. You've had some major events here and you still averaged. Had you left it alone and waited, as Charlie Munger says, what have? Averaged 7% on your money, and so this is really impactful. I think it's really a huge benefit to show just how powerful it is to just sit through the storm, as uncomfortable as it may be, but how rewarding waiting will be for you If you stick with your investments and give them the time to work for you. So thank you, charlie, for that incredible wisdom. You'll be missed, and thank you for your leadership at Berkshire Hathaway. Be confident in your retirement.
Speaker 1:
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