How to Handle a 50% Investment Loss - Lessons from Charlie Munger | DJ 2017 【C:C.M Ep.264】

 

[Transcript]

AUDIENCE MEMBER: So what happened 1973 and 1974 when your investment firm lost over half?

 

CHARLIE MUNGER: Oh, that’s very simple. That’s very easy. That’s a good lesson and that’s a good question.

 

What happened is the value of my partnership where I was running, went down by 50% in one year. Now the market went down by 40% or something. It was a once in 30 year recession. I mean monopoly newspapers are selling at 3 or 4 times earnings. At the bottom tick, I was down from the peak, 50%. You’re right about that.

 

And that has happened to me 3 times in my Berkshire stock. So I regard it as part of manhood. (Laughter)

 

If you’re going to be in this game for the long pull, which is the way to do it, you better be able to handle a 50% decline without fussing too much about it. And so my lesson to all of you is conduct your life so that you can handle the 50% decline with aplomb and grace. Don’t try to avoid it. (Applause)

 

It will come. In fact I would say if it doesn’t come, you’re not being aggressive enough. (Laughter)

 

(Source: https://youtu.be/BLctqhNClqY)

 

[YAPSS Takeaway]

"My lesson to all of you is conduct your life so that you can handle the 50% decline with aplomb and grace. Don’t try to avoid it. It will come. In fact I would say if it doesn’t come, you’re not being aggressive enough." ~Charlie Munger