"Beyond Astrology: Why Charlie Munger is Calling Investment Managers 'Fortune Tellers' and What It Means for Investors"

 

Charlie Munger, the 99-year-old billionaire and vice chairman of Berkshire Hathaway, has never been one to shy away from expressing his opinions. In a recent interview with the Financial Times, he took aim at the investment management industry, calling investment managers "fortune tellers or astrologers who are dragging money out of their clients' accounts." Munger, who has spent 45 years as Warren Buffett's right-hand man, acknowledged that investment managers face a much more challenging environment today, with stubborn inflation, higher interest rates, and rising competition making it difficult to achieve past returns.

Munger's criticism of the investment management industry is not without merit. A recent S&P Indices Versus Active scorecard revealed that 79% of fund managers underperformed their respective benchmarks in 2022. This marks a significant increase from just a decade ago when the figure was 42%, demonstrating the continued challenges faced by the active management industry.

Fortunately, investors today don't need a money manager. Brokers like Robinhood and Webull allow anyone to quickly and easily buy shares in stocks they love or the S&P 500. In addition, changes in federal law have given retail investors a new tool at their disposal. The JOBS Act allows anyone to invest in early-stage companies and high-growth startups on platforms like StartEngine and Wefunder, including owning a stake in StartEngine itself. Investors can browse hundreds of best-in-class startups backed by top venture capitalists.

With all of these tools available to retail investors, and with the consistently poor performance of investment managers, it's clear that the investment management industry might slowly be becoming a thing of the past. Retail investors can take control of their own investments, make their own investment decisions, and potentially achieve better returns than they would with an investment manager.

In conclusion, Munger's criticism of the investment management industry is a reminder that investors today have more options than ever before. With the right tools and resources, retail investors can make informed investment decisions and potentially achieve better returns than they would with an investment manager. It's up to investors to take control of their own investments and act as their own money manager.