Charlie Munger’s Timeless Advice for Surviving Market Crashes
Your ability to "react with equanimity" is more important than your IQ.
Dear CMQ Investors,
When markets crash, most investors panic. But Charlie Munger had a different approach—and it helped him make billions.
In 2009, amid a brutal market crash, Charlie Munger was asked if he was worried. His response? Pure investing wisdom that you can apply.
This is the third time that Warren and I have seen our holdings in Berkshire go down…by 50%. I think it's in the nature of long-term shareholding with the normal vicissitudes in worldly outcomes and in markets….In fact, you can argue that if you're not willing to react with equanimity to a market price decline of 50%, two or three times a century, you're not fit to be a common shareholder and you deserve the mediocre result you are going to get. —Charlie Munger
What can we learn from Munger’s wisdom? Here are three key takeaways.
1. Volatility Is the Price of Admission
Vicissitude is a fancy word for unpleasant change of circumstance. This is a normal part of life. If you’re in the market long enough, you will experience gut-wrenching drawdowns.
This isn’t an anomaly; it’s part of the game. Most people panic when this happens, but Munger and Buffett don’t—they expect it.
👉 Why It Works: Understanding that volatility is part of the process allows you to stay invested and benefit from long-term compounding. Many investors fail not because they pick bad stocks, but because they can’t emotionally handle downturns and sell at the worst times.
2. Temperament > Intelligence
Munger makes it clear that if you can’t remain calm during these downturns, you will get "mediocre results." This is a direct jab at investors who overreact to market swings.
Many believe investing success is about intelligence or stock-picking skills. In reality, temperament—the ability to not panic—is far more valuable.
👉 Why It Works: The stock market transfers wealth from impatient people to patient people. Those who stay invested when others panic end up buying undervalued assets and reaping the benefits later. Even if you don’t buy anything, just staying put allows you to reap the full benefit of long-term compounding.
3. The Market Fluctuates, But Business Value Matters More
Munger and Buffett don’t view stock price declines as real losses unless the fundamentals of the business change. A 50% drop in price doesn’t mean the intrinsic value of a great company has fallen by 50%.
If you own a great business, a market panic is just an opportunity to buy more at a discount.
👉 Why It Works: Most people anchor their emotions to market prices, but great investors focus on business fundamentals. This distinction prevents emotional decision-making and allows for rational investing.
I hope this is helpful to you on your journey as a long-term investor.
Sincerely,
Chris Franco
P.S. Follow me on X for more real-time updates about investing.
📚 Want more timeless wisdom about investing, delivered to your inbox? Join 5,300+ rational investors and become a free subscriber.
👋 Was this your first time here?
🧭 Read my most popular posts on Substack.
🎧 Listen to the CMQ Investing Podcast for Free on Spotify or Apple Podcasts.
Enjoyed this post? Hit the ❤️ button and share it with a friend who needs to hear this.