Charlie Munger And A Friend Each Made $70,000 Per Year From A $1,000 Investment 60 Years Ago — Raking In Millions Together

At his final Berkshire Hathaway Inc. meeting in 2023, months before his 100th birthday, Charlie Munger surprised investors with a story about a brilliant investment he made over 60 years ago alongside a golfing buddy. 

The story traces back to 1962 when Munger, then a real estate lawyer, struck an unlikely partnership with Al Marshall, an unemployed golfer with a keen eye for investments. Their encounter on the green led to a pivotal decision: pooling their resources to invest $1,000 each in oil royalties. Adjusting for inflation, $1,000 in 1962 is equivalent to $10,342 today.

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Marshall, drawing from his oil industry experience, was dabbling in purchasing oil royalties at auctions. Munger recognized that Marshall’s approach was flawed and saw an opportunity to leverage his legal expertise to structure a more lucrative deal. Their collaboration led to the forming of an AB trust, providing a tax shelter that has since been outlawed because of abuse.

“I’m still getting $2,000 to $3,000 a month from that,” Marshall told Janet Lowe, author of “Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger.” Marshall’s revelation, made before the book’s release in 2000, highlights the enduring success of their investment. 

“We only put up $1,000 each, and we’ve each probably made a half a million out of it,” Marshall said.

Over the years, Munger and Marshall’s $1,000 investment blossomed into a steady source of passive income, yielding an estimated $70,000 annually for each of them. Such returns allowed Munger the flexibility to draw a $100,000 salary from Berkshire Hathaway and enabled him to retain the bulk of his $2 billion fortune in company stock, which eschewed dividends.

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Munger’s foresight extended to his family, with the establishment of a trust that continues to provide monthly checks of $2,000 to $3,000, all stemming from the original $1,000 investment.

Berkshire Hathaway CEO Warren Buffett disclosed that his late father also ventured into oil royalties, investing between $1,000 to $1,500 before his passing. Buffett's younger sister inherited the royalties and continues to receive monthly payouts. 

Munger shared his perspective after recounting the story: “The trouble with that story is that it only happened once. That’s true of most investment stories."

While oil royalties may not be a readily available option for everyone, other strategies can generate passive income. Considering factors like risk tolerance, investment goals and time horizon, consulting with a qualified financial adviser can be a valuable step toward building a diversified portfolio that aligns with your needs.  A financial adviser can help you explore various investment options, including those that offer the potential for long-term growth and steady income streams.

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