Charlie Munger, the vice chairman of Berkshire Hathaway, shared his insights on navigating volatile markets during a recent talk in Michigan. He argued that large market pullbacks, usually seen as calamities in the news, are actually some of the most unique times to build wealth. Munger, who has experienced significant fluctuations in Berkshire’s portfolio alongside Warren Buffett, underscored the importance of adopting a philosophical mindset towards market fluctuations.
Munger was impressed that after each big fall, Berkshire’s investment portfolio has always reemerged at all-time highs. He pointed out that both he and Buffett had witnessed their company’s holdings decline by 50% three times throughout their careers. As much as they experienced challenges and disappointments, they maintained a long game perspective. They were confident that U.S. businesses would eventually recover and continue to create profits.
“Real opportunities that come to you are few,” Munger stated, reminding investors to recognize the value in seemingly bleak market conditions. He advised the audience to put their heads down and conduct themselves creditably every day, rather than waiting idly for favorable market conditions to return.
Munger shared an anecdote from his great-grandfather to further strengthen the idea of making hay while the sun shines. In his view, investors who cannot handle the emotional swings of the market may not be suited for long-term investing. “If you can’t handle swings, 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 remarked.
The vice chairman also reiterated the famous maxim attributed to Buffett: “Be fearful when others are greedy, and be greedy when others are fearful.” He elaborated that whenever the markets show an opportunity of a “lollapalooza” moment—an aberrant, once-in-a-lifetime opportunity—investors should jump without thought. “When you get a lollapalooza, for God’s sakes, don’t hang back like a timid little rabbit,” he urged.
Munger’s comments resonate with anyone who’s seen their investments bounce around like a ping pong ball. That’s particularly true during chaotic periods — like in the 2008 financial crisis, when shares of Berkshire Hathaway fell over 50%. Despite such challenges, Munger and Buffett have consistently pursued undervalued stocks, demonstrating their faith in the eventual recovery of American businesses.
Boasting the confidence of the successful investor, he gave me the humble admission that investors will probably experience many more booms and busts over our lifetime. “I think you can count on more booms and busts over your remaining lifetime,” he said. That is part of the truth noted by Munger that he says proves why we must invest in a consistent, predictable manner.