Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.
TV personality Jim Cramer is so often the butt of jokes on Wall Street that someone briefly launched an exchange-traded fund to bet against his stock picks. The host of CNBC’s “Mad Money” is no stranger to criticism, even from famous investors such as the late Charlie Munger.
“We never thought we could get really useful information on all subjects like Jim Cramer pretends to have,” Munger once quipped to investors at a Daily Journal shareholders meeting in 2019.
He later went on to say, “Now at a place like Berkshire Hathaway or even Daily Journal, we’ve done better than average. … why has that happened? The answer is pretty simple: we tried to do less.”
Munger, who died in November last year, was worth $2.2 billion, according to Forbes. In addition to being chairman of the Daily Journal (DJCO), he had great success working alongside his friend and business partner, fellow billionaire Warren Buffett, as Vice Chairman of conglomerate Berkshire Hathaway (BRK-B).
Here’s the simple investing strategy Munger says brought prosperity to Berkshire and the Daily Journal.
As a credit to Buffett and Munger’s investing acumen, Berkshire Hathaway reported a 19.8% compounded annual return from 1965 to 2023, compared to the S&P 500’s 10.2% return over the same period.
Munger told the crowd of Daily Journal shareholders that the secret to their success was they took a different approach compared to other professional money managers.
He added that some stockpickers believe “if they study a million things they can know a million things, and of course the result is almost nobody can outperform an index whereas … I’m outperforming everybody.”
Instead of making daily stock picks, the Berkshire team prepared for a few big wins in a handful of sectors where they felt they had a genuine edge over the average investor.
This approach isn’t just for those with a billion-dollar portfolio; ordinary investors can also benefit from this advice as well.
In 2024, assets managed by passive funds surpassed active funds for the first time, according to Morningstar. So this approach is certainly gaining in popularity — and there are ways you can put this approach into action for your own portfolio.
For example, with Acorns, you can take a passive investing approach with your daily spending.
Every time you make a purchase with your credit or debit card, Acorns will automatically round up the amount you spend to the nearest dollar and invest the difference in a diversified portfolio of ETFs. So you can follow Munger and Buffett’s “do less” approach and feel confident that you’re able to save and invest just by spending as you normally would.
For those who want a balance of automation and control, Acorns Gold offers a unique blend of both. It combines the ease of automated, diversified portfolios with the option to get more involved by picking individual stocks, giving you the best of both worlds in managing your investments.
If you sign up now, you can receive a $20 sign up bonus to kickstart your investing journey.
If you’re unsure which path to take amid today’s market uncertainty, it might be a good time to connect with a financial advisor through Advisor.com.
This online platform connects you with vetted financial advisors best suited to help you develop a plan for your new wealth.
Just answer a few quick questions about yourself and your finances and the platform will match you with an experienced financial professional. You can view their profile, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
You can view advisor profiles, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
Read more: Rich, young Americans are ditching stocks — here are the alternative assets they’re banking on instead
Since Buffett and Munger’s approach was more simple and straightforward, it’s more accessible. Ordinary investors can easily “do less” and perhaps the best way to do so is to adopt a passive investing approach, such as investing in a low-cost index fund. But maybe a more active approach suits your investing style — and there are resources that can guide you no matter your chosen approach.
In contrast to the Munger approach, Morningstar’s analysts also found that some segments of the market were easier to outperform. Actively-managed bond funds, for instance, had a 79% success rate in 2024 – up 18% from 2023 – while 66% of real estate funds and 43% of small-cap funds outperformed their passive peers.
Need more guidance before deciding which trades to make?
The team of former hedge fund analysts and experts at Moby spend hundreds of hours each week sifting through financial news and data to provide top-tier stock and crypto reports to keep you up-to-date on what’s moving the markets.
Moby’s superior research can help you reduce the guesswork when selecting stocks and ETFs. In four years, across almost 400 stock picks, Moby’s recommendations have beaten the S&P 500 by almost 12%, on average.
With their easy-to-understand formats, you can become a wiser investor in just five minutes, backed by a 30-day money back guarantee.
Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. Subscribe now.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.