Charlie Munger: Tooth Fairy Points

Posted by admin on Thursday, August 22, 2019

Charlie Munger Money Quote saying that Berkshire Hathaway doesn’t use trendy strategies that are comparable to children’s fairy tales to invest. Charlie Munger said:
 

 

“I think you’d have to believe in the tooth fairy to believe that you could easily outperform the market by seven percentage points per annum just by investing in high volatility stocks” — Charlie Munger

 

 

In this quote, Charlie Munger is expressing skepticism about the ability of individual investors to consistently beat the overall market by large margins simply by investing in more volatile stocks. He implies it would take an unrealistic belief, like in the tooth fairy, to think you could reliably achieve annual returns 7% higher than the market average just through picking stocks with high price fluctuations.

Munger seems to be warning against overconfidence in being able to time the market or select winners, suggesting it is very difficult to outperform professionally managed indexes by such a wide margin on a long-term basis only using high volatility stocks as your investment strategy.

Categories: investment Tagged:charlie mungerinvestingmarketstocks