Charlie Munger's Timeless Advice For Navigating Volatile Markets: 'Be Fearful When Others Are Greedy, And Be Greedy When Others Are Fearful'

Charlie Munger, the late vice-chairman of Berkshire Hathaway, once offered some words of wisdom for investors dealing with market turbulence.

What Happened: Munger, who was a close collaborator of Warren Buffett at Berkshire Hathaway, underscored the necessity for long-term investors to weather market volatility. He argued that if investors are unable to tolerate substantial market downturns, they are not cut out to be ordinary shareholders.

Munger drew from his personal experience during the 2009 financial meltdown, when his Berkshire Hathaway shares had plummeted by over 50%. Despite this setback, he retained his faith in the company and persisted in his stock market investments.

“I think it’s in the nature of long-term shareholding that the normal vicissitudes in markets means that the long-term holder has the quoted value of his stocks go down by, say, 50%,” Munger told BBC in an interview.

“If you’re not willing to keep your chin up during the occasional rout, you’re not fit to be a common shareholder, and you deserve the mediocre result you’re going to get compared to the people who can be more philosophical about these market fluctuations,” he added.

Also Read: Charlie Munger’s Four Life Lessons: ‘Consume Less Than You Accumulate, Invest Judiciously, Persistently Learn, and Uphold Discipline’

Both Munger and Buffett adhered to Buffett’s renowned mantra: “Be fearful when others are greedy, and be greedy when others are fearful.”

This strategy guided them to consistently acquire undervalued stocks, trusting in the eventual success of American businesses.

Furthermore, Munger counseled investors to exploit opportunities to purchase assets at substantial markdowns during major market slumps, instead of holding out for better conditions.

Why It Matters: Munger’s advice comes at a time when market volatility is a significant concern for many investors. His words serve as a reminder that patience and long-term vision are key to navigating turbulent markets.

His strategy of capitalizing on market downturns by purchasing undervalued stocks has proven successful in the past, and may serve as a useful guide for investors in the current climate.

His belief in the eventual success of American businesses also offers a positive outlook for investors worried about the future of the U.S. economy.