Charlie Munger Revealed 3 Reasons Warren Buffett Was“So Much Richer” - Here's How Any Investor Can Use Them

2025-11-08 02:11:07

(MENAFN- News Direct) >

Charlie Munger wasn't known for mincing words, and that was never more true than in 2019, when at the Daily Journal Annual Meeting, he received a pointed question about his wealth that made the crowd laugh.

“In spite of being partners for so long, why is Warren so much richer than you?” the audience member asked, referring to Warren Buffett's US$82.5 billion net worth (1) compared to Munger's US$1.6 billion (2), at the time.

“Well, he got an earlier start, he's probably a little smarter, he works harder - there are not a lot of reasons," replied Munger before asking: "Why was Albert Einstein poorer than I was?”

Charlie Munger was the vice chairman of Berkshire Hathaway for 45 years until his death in 2023 - and second-in-command at Buffett's investing empire.

The quick lesson - from Munger's response - is that starting early, investing smartly and working hard at preserving your savings are integral to amassing a fortune. Here's how Warren Buffett, also known as the Oracle of Omaha, used these strategies and how you can apply his approach to grow your portfolio.

Don't Miss

Want to retire with an extra $1.3M? See how Dave Ramsey's viral 7-step plan helps millions kill debt and build wealth - and how you can too
The Canadian economy shrank in Q2 2025 - protect your wallet with these 6 essential money moves (most of which you can complete in just minutes)
Boomers are out of luck: Robert Kiyosaki warns that the 'biggest crash in history is coming' - here's his strategy to get rich before things get worse

How Warren Buffett built his billions

While Charlie Munger's net worth reached US$2.5 billion before his death, Buffett's wealth currently sits at about US$147 billion - almost double what it was back in 2019 when Munger was asked about the wealth disparity between the two investing gurus.

And while Berkshire Hathaway's operations might be complex, Buffett's investing tenets are still quite simple.

Start young

The younger, the better. Buffett invested for the first time at age 11, allowing his contributions to tap the power of compound interest (and earnings) decades earlier than the average investor - a critical investing tool if you want to amass a fortune.

The power of compound interest only really starts to show up once you've been in the market for some time, or once you've reached a significant milestone - like the $100,000 benchmark Munger often cites (3).

Unfortunately, most people don't understand how to invest at the age of 11 or even 21 - making this starting point unrealistic for many. Still, the idea of compounding your earnings still applies and can turn small invested sums into large savings (by allowing earnings and compounding to do the heavy lifting).

Find value

Buffett also believes it's essential to find undervalued smaller companies to invest in, as he initially built his wealth on small-cap businesses, in particular furniture and candy stores.

“I probably would be focusing on smaller companies because I would be working with smaller sums and there's more chance that something is overlooked in that arena,” he said during a 1999 shareholder meeting (4).

Make competent choices

While Buffett's strategy is proven to work, it's not always easy to keep up with the ever-changing market. If your 9-to-5 doesn't revolve around monitoring the stock market, you might feel overwhelmed trying to find that next undervalued business to invest in.

For that reason, another of Buffett's tenants should apply: Invest within your circle of competence. Essentially this means you should stick to investing in what you know and understand. This is exactly how Buffett grew and kept his fortune, focusing the majority of his investment wealth on two sectors: financial services and consumer goods.

If you want to expand your own circle of competency, it might be worth working with an advisor whose expertise is in a different area than your own. Another option is to invest in stock analysis platform, such as The Motley Fool or Moby.

Using The Motley Fool (TMF), investors get access to expert insight as well as curated equity picks. Plus the online platform offers investing insight and education to help you deepen and broaden your investing knowledge. Right now, new subscribers can get unlimited access to Motley Fool Stock Advisor Canada insights for just $1.90 per week.

With the Moby platform investors get tailored, data-driven insights on various companies which helps you navigate complex markets and make informed investing decisions. Three times a week, subscribers also get hand-picked investment opportunities, delivered straight to their inbox.

How Charlie Munger reached billionaire status

While Munger's wealth never came close to Buffett's US$100-billion-plus, Munger was still a billionaire when he passed.

His early success came from focusing on real estate, where he earned his first million dollars. Only after making his money in real estate did he begin to branch out and invest in equities (5).

While Munger felt comfortable with brokering lucrative real estate deals, for most people, this type of investing can feel complicated or overwhelming. Plus, being a landlord isn't for the faint of heart. Still, that doesn't mean you can't tap into Munger's strategy and use real estate to grow your wealth.

Investing in Canadian real estate

Investing in real estate is not the same as buying a home. When investing in real estate, you can opt to purchase real property - such as rental buildings - or you can opt for a more liquid option, such as shares in real estate investment trusts (REITs) or through real property focused exchange-traded funds (ETFs). There's also the option to use real estate crowdfunding platforms or private lending opportunities, although many of these are only open to accredited investors (in Canada) or only suitable for investors who can tolerate more risk.

To add real estate to your portfolio - and mimic Charlie Munger's strategy of diversifying through real property investments - investors can opt to follow a number of strategies.

Strategy #1: Active investing

There are multiple ways you can actively invest in the Canadian real estate market. The most common way is to buy an investment property. Keep in mind that this option requires a large, up-front cash investment and can take years to produce a suitable return on investment (ROI).

Strategy #2: Flip houses for a profit

House flipping can be highly profitable when done right. The strategy involves buying a fixer-upper, renovating it, and selling it for a profit. However, what may look easy on TV doesn't always translate when it comes to real life. House flipping comes with risks including unexpected costs, market downturns and even new tax laws that can clawback an investor's projected profit.

To maximize your return, learn the trade before you buy a property. Partnering with a trusted contractor or tradesperson can help mitigate some risks. However, success in house flipping will depend heavily on careful financial planning. Speak with a real estate agent to gauge the potential resale value before making a purchase. Compare estimated renovation costs to projected selling prices to ensure you can turn a profit.

Strategy #3: Generate income from rental property investment

Investing in rental properties can provide a steady cash flow while building long-term wealth. The key is to buy a rental property in a desirable location - one with low vacancy rates, access to public transit and major employers nearby.

But you need to realize that owning a rental property is an active investment - more of a business to be run than a set-and-forget investment purchase. Hiring a property manager can help minimize some of the hands-on work, but it will eat into your profits (and you'll still be required to monitor and assess all expenses and earnings).

Keep in mind that financing a rental property isn't the same as getting a mortgage for your own home. Lenders often charge higher interest rates, and you'll need to put a down payment of 20% of more of the purchase price to secure the funding. That's why it's crucial to compare mortgage rates and lenders.

Strategy #3: Profit from a vacation rental property

A vacation rental property can serve as both a getaway and an income-generating asset, but it requires careful planning.

If you're buying mainly as an investment, location is everything. Properties near lakes, mountains, or popular tourist destinations tend to generate higher rental demand. In Canada, vacation rentals are typically subject to different tax rules - with some areas charging a vacation-home tax, along with GST/HST on rental income.

If you opt to invest in an American vacation property, keep in mind that mortgage applications, tax laws and even title documents work differently. To avoid unpleasant (and costly) surprises, work with an American mortgage broker, real estate agent and insurance provider - and consider working with a cross-border tax specialist that can help with local and international tax laws as well as short-term rental regulations.

Like rental properties, getting a mortgage for a vacation home will require a larger down payment - typically 20% to 25%, although you may be asked to increase this sum, depending on the location or type of property. Lenders assess whether you'll be cash-flow positive based on projected rental income versus expenses.

A smart approach is to use the Buy, Renovate, Rent, Refinance, Repeat strategy - commonly referred to as the BRRRR strategy. By using this strategy, you can theoretically maximize returns by improving the property's value before renting it out. Prior to purchasing, you should also analyze local short-term rental demand, average nightly rates and occupancy levels to determine profitability.

Remember, running a short-term or vacation rental - like an Airbnb or VRBO - can be lucrative, but it's not passive income. You'll need to handle guest turnover, maintenance and local compliance rules. There may be local licensing you must obtain in addition to tax obligations. Other drawbacks are dealing with difficult guests, fluctuating demand, potential property damage, time spent managing bookings as well as changing rules and regulations.

Still, the upside of vacation or short-term rental income can be significant, especially when compared to revenue generated by long-term leases.

Read more: Are you drowning in debt? Here are 3 simple strategies to help crush your balance to $0 in no time

Strategy #4: Passive real estate investing

Another option is to skip owning real property - including all the hassles required of a landlord - and to outsource that responsibility to someone else. One option is to Invest using a real estate crowdfunding platform.

Real estate crowdfunding allows investors to pool their money to invest in larger projects without the need for direct property ownership. Platforms connect investors with developers looking to fund residential and commercial properties. This passive approach lets you benefit from real estate appreciation and rental income without the responsibilities of property management.

Most crowdfunding platforms require a minimum investment, but they offer diversification by allowing you to invest in multiple properties at once. Keep in mind that these investments can be less liquid - and offer less regulatory oversight - than publicly traded real estate investment trusts (REITs), meaning your money may be tied up for several years. Before investing, research different platforms, their fees and the projects they fund to ensure they align with your financial goals.

For most Canadian investors, real estate crowdfunding is limited to U.S.-based platforms or only available to accredited investors. An accredited investor is someone who earned more than $200K in annual income over the last two tax years ($300K if it's a couple) and whose financial assets exceed more than $1 million or a net worth over $5 million. In otherwords, these are investors who can withstand a higher risk (of losing their invested money) and, as a result, are allowed to invest in private placements and other opportunities not available to the general investing public.

Strategy #5: Invest in REITS to generate passive income

If you're not an accredited investor or don't like the lack of regulatory oversight found in private or crowdfunded investment opportunities, then consider investing in real estate using real estate investment trusts (REITs). REITs give investors access to real estate earnings without buying property. REITs own and operate a range of commercial and residential properties, including office buildings, apartments, hospitals and shopping centres. Investors earn returns through dividends and potential price appreciation.

Publicly traded REITs can be bought and sold on the stock market, providing flexibility and liquidity. If you're concerned about risk, consider a diversified REIT or an exchange-traded fund (ETF) with a focus on REIT holdings, as this will spread exposure across multiple properties.

Private REITs, on the other hand, are less accessible, operate with less accountability but may offer higher returns. Before investing, research a REIT's stock price stability and dividend history to ensure it aligns with your financial goals. If you prefer a hands-off approach, an online brokerage, like Qtrade, allows you to buy REITs and ETFs at no cost, helping you build a diversified real estate portfolio with minimal effort.

Open a Qtrade Direct Investing account and get 5% cash back on every dollar invested up to $15,000. Use promo code QTRADE2025.

Strategy #6: Buy commercial real estate for long-term growth

Investing in commercial properties - such as office buildings, retail spaces or industrial facilities - can generate steady rental income and long-term appreciation. While commercial real estate typically requires more capital and expertise than residential investments, it also offers higher returns. Investors can buy commercial properties outright, join a commercial real estate fund, or invest through a REIT specializing in commercial assets.

You can technically invest directly in commercial properties, but most of us don't have a spare $1 or $2 million to go toward the hefty down payment - at least, not yet. The more realistic way to invest is through a commercial real estate company's mutual fund, ETF or through a REIT that specializes in properties in this sector.

Bottom line

Regardless of the strategy chosen, the key factors required to build wealth based on Charlie Munger and Warren Buffett's proven success are to: start young, invest in what you know and add diversification through alternative investments (such as real estate or gold).

- with files from Lisa Lagace and Romana King