The late Charlie Munger, renowned investor and vice chairman of Berkshire Hathaway (NYSE:BRK), once asserted that 95% of investors stand no chance of outperforming the S&P 500 Index.
What Happened: During an interaction a few years ago, Munger shared his thoughts on the challenges investors face in trying to outperform the market. Munger, who passed away in 2023, was a close associate of Warren Buffett, and his advice remains highly valued in the investment world.
Munger acknowledged the dominance of index funds like the S&P 500, which represents a significant portion of the market.
He warned against the risks of excessive popularity in index investing, drawing parallels to the Nifty Fifty era, where a narrow focus on a select group of stocks led to unsustainable market conditions and subsequent downturns.
“95% of people have no chance of beating the S&P 500 Index. The index funds of the S&P, it’s like 75% of the market. But is there a point where index funds theoretically can’t work? Of course. If everybody bought nothing but index funds, the whole world wouldn’t work as people expect,” Munger said.
“If you get too …
