Life is short. So while a side hustle could give me a passive income, I don’t have nearly enough time to make it happen.
Between work and family and everything else, I’ve barely got enough time to think, let alone start an Airbnb or Youtube channel.
But if I was starting again with my investing journey, I’d follow this strategy for a happier, easier life.
Better than Buffett?
Billionaire Warren Buffett gets all the praise for building incredible wealth over his 60 years in stock trading.
But along the way he had a secret weapon at his side. Charlie Munger was his business partner and the Vice-Chairman of Berkshire Hathaway.
Today, their investment company is the eighth-richest in the world, worth more than Coca-Cola, Astrazeneca and Shell put together.
It was only at their annual shareholders’ meeting in 2023 that Munger revealed the cost — and returns — of his best investment.
60 years of passive income
Before he died, Charlie Munger received $70,000 (£55,000) a year passive income from a $1,000 (£800) investment he made more than 60 years before.
Most of us would be delighted with that kind of return.
For me, that would be enough for a very comfortable retirement. I can just imagine how I would spend my time swanning around the world playing golf (badly).
So how did he make so much from so little?
Royalty-free
Back in 1962, just three years after Munger first met Buffett, the two men hatched a plan.
Using savings of $1,000 each, they outbid oil brokers at auction on a set of royalty interests on oil-producing fields. These royalty agreements gave Munger an interest in any oil produced at those sites.
That $1,000 (£800) would have around the same purchasing power as $10,000 (£8,000) today. Markets Insider estimates that Munger made over $1m (£800,000) from this bet over the course of the next 61 years. So even accounting for inflation, it was still a 1,000-bagger investment.
That’s a reliable passive income from a single good decision made decades before.
This is likely one of the reasons why Charlie Munger was happy to accept a salary of $100,000.
A six-figure salary isn’t to be sniffed at. But it’s much less than most would get as as Vice-Chairman of one of the world’s largest companies.
Make your own success
Amazing opportunities like the one Charlie Munger took advantage of don’t come around every week.
That’s why it’s savvy to keep cash on hand and do the work to sniff out once-in-a-lifetime picks.
And Munger never stopped learning throughout his seven-decade career. His past success never stopped him investing the time and energy into researching markets and looking for the next big thing.
There’s one other thing I really need to mention.
There’s a much easier way to generate wealth than trying to be super-smart, he said.
“It is remarkable how much long-term advantage people like us [have] by trying to be consistently not stupid.”
Now that’s a message I can get behind.
