How you are guaranteed NOT to be successful on the stock market

How to Guarantee a Life of Misery

This was also the conviction of the late Charlie Munger, who together with Warren Buffet built probably the most successful investment firm of all time. Munger was invited as a guest speaker at Harvard University’s 1986 graduation ceremony. Usually, the invited speakers talk about their extraordinary careers and successes. But not Munger – his speech entitled “How to Guarantee a Life of Misery” was completely different. Instead of recounting wisdom for a successful career, Munger gave four tips on how to guarantee a life of misery. The idea behind this was as simple as it was ingenious – negative recipes are more meaningful and memorable. Munger’s conclusion: “Tell me where I’m going to die and I’ll never go there”. While success stories inspire, the stories of failure offer deep insights into the complexity of the financial markets. That is why I would like to share three such stories with you here, which show how important it is to learn from mistakes.

Mr. Müller’s missed opportunity

Mr. Müller, a passionate amateur investor and father of two, has always had an eye for emerging technologies. His investment in a small tech startup was the result of months of research and numerous discussions with industry experts. He was convinced that this startup, with its innovative technology and dedicated management team, had the potential to revolutionize the industry.
Initially, everything looked promising. But then an unexpected stock market crash hit the markets, caused by global economic uncertainties and political tensions that panicked investors worldwide. Fear and uncertainty also spread through Mr. Müller’s mind. Despite his original conviction and the positive long-term forecasts for the start-up, he allowed himself to be infected by the general market mood. In a moment of fear and doubt, he rashly sold all his shares, driven by the fear of losing all his hard-earned money.
The months that followed were a time of deep regret and self-reflection. He watched as the market recovered and the startup he had originally invested in rose to new heights. The shares he had sold in panic multiplied in value. This experience became a painful but valuable lesson about the importance of patience, long-term thinking and trusting one’s judgment, even in times of uncertainty.

Ms. Schneider’s deep fall into the crypto world

Mrs. Schneider, a respected engineer with a keen mind for technical innovation, had built up a considerable fortune over the years through thoughtful and wise investments. Her fascination with new technologies and the dream of financial independence led her into the world of cryptocurrencies – an area that was still considered the “digital gold” of the 21st century at the time.
One day, she came across a cryptocurrency that was hailed as a groundbreaking innovation. The forums and social media were full of stories about spectacular profits, and influencers touted this cryptocurrency as the next big opportunity. The prospect of quick riches clouded Ms. Schneider’s otherwise critical eye. She ignored her rule of always doing thorough research and weighing up the risks. Instead, she let herself be carried away by the general euphoria and invested a substantial part of her assets in this promising currency.
The first few weeks seemed to confirm her decision as the value of her investment rose rapidly. But then, almost overnight, the market collapsed. The cryptocurrency lost a large part of its value within hours. Ms. Schneider experienced a financial nightmare as her hard-earned fortune melted away. But even more painful than the financial loss was the realization that she had allowed herself to be blinded by the illusion of quick profits and had violated her own principles. This experience was a turning point for Ms. Schneider. She realized that true financial wisdom lies not in chasing the next big thing, but in careful analysis and a deep understanding of what you are investing in. She learned that no return is worth risking her principles and the security of her wealth.

Mr. Bauer’s arrogance after previous successes

Mr. Bauer, a self-confident bank manager, had successfully anticipated market trends twice in the past and made considerable profit from them. These successes had given him excessive self-confidence. He firmly believed that he had an unerring feel for the market. With this conviction, he bet big on a complex and risky investment strategy. However, when his predictions failed, he found himself in a shambles not only financially but also personally. He had to realize that real market knowledge is not based on individual, random successes and that overconfidence can lead to serious mistakes. This humbling experience taught him that humility and continuous analysis are essential for sustainable success.

What we can learn from this

1. Greed for a quick buck is a false premise for investing.
2. Fear is a bad advisor on the stock market – emotions are an investor’s worst enemy.
3. Don’t confuse luck with expertise and experience.

These stories are not just tales of failure, but also reminders of the complexity and unpredictability of the financial markets. They teach us that patience, thorough research, diversification and a dose of humility are the keys to long-term success.

With this in mind, let’s use these lessons to make wiser and more considered investment decisions.

Yours, Mark Stock©

Mark Stock is a member of the Point Capital editorial team. “I am a stock market enthusiast and am passionate about economic history. I have been following the ups and downs of the markets for years and, of course, invest myself – preferably in shares. So my name says it all. Every month, I take up what I consider to be an exciting topic. And since the focus is on the content and not on me personally, I write under a pseudonym.”