Power Players

Charlie Munger warns Gen Z investors: It's 'way harder' for recent college graduates 'to get rich and stay rich'

Charlie Munger at Berkshire Hathaway's annual meeting in Los Angeles California. May 1, 2021.
Gerard Miller

Charlie Munger has been managing investments for a long time — and the billionaire says it's never been harder for young people to make and keep their money.

In February, at publishing company Daily Journal Corporation's annual meeting, Munger said that successfully navigating the investment world has gotten a lot harder over the past few decades. He also noted that costs of living in many parts of the U.S. are significantly higher than they've ever been, even accounting for inflation.

"It's going to be way harder for the group that's graduated from college now ... to get rich and stay rich," Munger, 98, said. "Think what it [used to] cost to own a house in a desirable neighborhood in a city like Los Angeles."

On Monday, Munger stepped down as the Daily Journal's chairman, according to a recent filing. He remains the company's director, and the longtime vice chairman of Warren Buffett's investment and holding firm, Berkshire Hathaway.

In 1980, two years after Munger became Berkshire Hathaway's vice chairman, the median price for a house in California was $80,055. Adjusting for inflation, that would be worth just over $275,600 today, according to Bureau of Labor Statistics. Last year, California's median house price eclipsed $800,000 for the first time ever, according to the California Association of Realtors.

The contrast, Munger said, makes it difficult to give today's young people any "one-size-fits-all investment" advice. For decades, his go-to advice was to "own a diversified portfolio of common stocks" — a strategy that could earn intelligent investors roughly a 10% return, he said.

But that's no longer such a foolproof tactic, especially given how complex investing has become. "I don't think the future is going to give the guy graduating from college this year nearly that easy [of] an investment opportunity," Munger said.

That doesn't mean young people can't profit off smart investments – it just might take patience. At Berkshire Hathaway's 2020 shareholders meeting, Buffett suggested avoiding single stocks in favor of the S&P 500, a low-cost index fund that holds 500 of the U.S. largest companies. It's a more passive investment strategy that reduces the risk involved in owning individual stocks, which could unpredictably tank.

At the Daily Journal's annual meeting, Munger noted that getting some personalized advice could also help.

"I think you have to figure out your level of skill, or the level of skill your advisor has," he said. "To everyone who finds the current investment climate hard and difficult and somewhat confusing, I would say: Welcome to adult life."

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