Over the weekend, I saw an Instagram post celebrating the 99th birthday of Charlie Munger with some of his best quotes.
“Who?” you may well be wondering.
Charlie Munger: the less-well-known business partner of Warren Buffett. You know him — the sixth richest person in the world. Sometimes ranked second, sometimes first. Big pal of Bill Gates. Made his fortune through investing.
Warren Buffett is usually the one known for his bon mot game.
Gems like, “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold.”
(This is why we tell you to stay the course in investing during years like 2022. Those are the times when your recurring deposit may buy investments at what only the benefit of hindsight can tell are steals.)
Another Buffett-ism: “You don’t find out who’s been swimming naked until the tide goes out.”
(The tide here being the markets. We’ve certainly seen some proverbially naked people when the bull market became a bear market, and tech stocks and crypto imploded. Certainly Sam Bankman-Fried was naked. Elon Musk may well have been in a Speedo.)
But I digress. The Charlie Munger quote that I found myself nodding my head to was just as good: “The big money is not in the buying and the selling, but in the waiting.”
Perhaps not as evocative as his business partner’s quotes, but important nonetheless, for two main reasons.
One is that, in investing, you need time to let the power of compounding do its thing.
We talk a fair amount about compounding at Ellevest, but in a nutshell, it’s the sort-of-counterintuitive “rule” that historically, investments have grown grow more quickly over time, because you can earn returns not just on your original investments, but also on the returns on those investments. Here’s our explainer that lays out how it works. That’s the “waiting” part.
The other reason this quote is key is because we human-folk are wired for action. And we have been taught, individually and culturally, that the important things in life take a lot of effort.
That’s true for our careers. It’s true for our relationships. It’s true for training for that half-marathon.
So it makes sense that investing — that thing that can buy you financial peace of mind, or a trip around the world, or a take-this-job-and-shove-it moment — might feel like it should require a lot of reading, a lot of monitoring, a lot of trading, a lot of CNBC-watching.
Take it from Ellevest Chief Investment Officer Dr. Sylvia Kwan. As she put it most recently, in her 2023 market outlook: “Hope isn’t a strategy. Being prepared with a diversified portfolio that can withstand market ups and downs is.”
That means that no matter how much it feels like there’s some way to outwit a market downturn, or make Buffett-level bucks fast, wealth has historically lain in the long game. Proper asset allocation, dollar-cost averaging, and years of compounding.
No CNBC required.
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