Charlie Munger Only Owned 3 Stocks And Called Diversification A Strategy for People Who Know Nothing — 'Am I Securely Rich? Damn Right I Am'

When most people think of legendary investor Warren Buffett, they picture the Oracle of Omaha picking winning stocks like apples at a grocery store. But his right-hand man, the late Charlie Munger, had a much simpler, more concentrated approach to investing—and wasn't shy about saying so.

Munger, vice chairman of Berkshire Hathaway and longtime business partner to Buffett, once told a room of shareholders that his own family's entire portfolio was made up of just three major holdings.

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"The Mungers have three stocks. We have a block of Berkshire, we have a block of Costco, we have a block of Li Lu's Fund, and the rest is dribs and drabs," Munger said at the 2017 Daily Journal Corp. annual meeting. "So am I comfortable? Am I securely rich? You're damn right I am."

While financial advisors preach the gospel of diversification—owning dozens of stocks, mutual funds, and ETFs to reduce risk—Munger called that approach unnecessary for people who actually know what they're doing.

"Diversification is a rule for those who don't know anything," he said. "Warren calls them ‘know-nothing investors.'"

Munger wasn't just comfortable with three holdings—he argued you don't even need that many if you truly understand what you're buying.

"What are the chances that Costco's going to fail? What are the chances that Berkshire Hathaway's going to fail? What are the chances that Li Lu's portfolio in China is going to fail?" he said. "The chances that any one of those things happening is almost zero. The chances that all three of them are going to fail…"

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He let the implication hang there.

It was all part of Munger's larger argument that the conventional wisdom around diversification—what he called "balderdash"—was a safety net for people who didn't have an edge.

According to Munger, the problem isn't just that diversification can be overkill—it's that it's taught by people who don't practice what they preach.

"To think we're paying these professors to teach this crap to our young… where it's right, it's an idiot decision, and where it's wrong, you shouldn't be teaching what's wrong."

For investors who actually know what they're doing, he had a much simpler prescription:

"If you're not a know-nothing investor, if you're actually capable of figuring out something that will work better, you're just hurting yourself looking for 50 when three will suffice. Hell, one will suffice if you do it right."

Munger passed away in 2023 at age 99, just weeks shy of his 100th birthday. Until the end, he was still cracking jokes, calling out financial fluff, and doubling down on simplicity. While most investors zigzag toward complexity, Munger stuck with what he knew—and didn't feel the need to hedge with noise.

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