'I Held Out Until It Got Back To Almost Where I Paid For It And Then I Sold It': Late Billionaire Charlie Munger Once Admitted He Made The Classic Amateur Mistake

Charlie Munger spent half a century lecturing investors on the psychology of their own mistakes. A month before he died, he admitted to one of the most common mistakes. Asked on the Acquired podcast how his investment in Hyundai had worked out, Munger said: "I lost money. Not much because I was stubborn. I held out until it got back to almost where I paid for it and then I sold it."

That sentence describes, almost word for word, the behavior behavioral economists call the disposition effect: the tendency to sell winners too early and hold losers too long, waiting for a stock to return to what you paid before letting it go. Hersh Shefrin and Meir Statman named it in 1985, and Terrance Odean documented it across thousands of retail brokerage accounts in a 1998 Journal of Finance paper. It is the mistake Munger's famous 1995 talk on the psychology of human misjudgment was written to help people avoid. Here he was, at 99, saying he had made it with his own money.

Two details matter for anyone tempted to read too much into it. The first is "not much." Munger did not say the trade was a disaster, and the recording does not support that reading. Second, he gave no date, size, or price. The interview doesn't say when he bought Hyundai, when he sold, or whether he held the shares personally or through a vehicle. Daily Journal, whose portfolio he ran for years, disclosed a short list of holdings in its 13F filings; Hyundai, a Korean listing with a U.S. over-the-counter ticker, would not necessarily have appeared there in any case. The honest description is the one he gave: his own money, on a timeline he did not disclose.

The exchange came in a stretch of the interview about Asian carmakers. Munger had just praised BYD's (BYDDF) founder, Wang Chuanfu, in characteristic terms: "But that guy works 70 hours a week and has a very high IQ. He can do things you can't do. He can look at somebody else's auto part, and he can figure out how to make the god damn thing." A host then said, "Charlie, you invested in Hyundai." "Yes, but they're clever, too," Munger replied, before the question that produced the confession. The next question was about Berkshire Hathaway's (BRK.B) (BRK.A) Japanese trading houses, and Munger's tone changed entirely: "But that is a no-brainer. Something like that, if you're as smart as Warren Buffett, maybe two, three times a century you get an idea like that. The interest rates in Japan were half a percent per year for 10 years."

The contrast is the point. Japan borrowed cheaply and bought cheaply, and Munger called it an idea that comes along a few times a century. The Hyundai position was a personal bet he held past the point he should have, for the reason most people do. The same man who told a Berkshire crowd that he owned just three stocks still had, somewhere in his past, a fourth that he was stubborn about.

It was not the only admission in the interview. Earlier, Munger said Berkshire Hathaway had left money on the table by being careful. "If we used a little bit more leverage throughout, we'd have three times as much now. And it wouldn't have been that much more risk, either," he said, and then gave the reason they never did: "We never wanted to give them any least chance of us screwing up our basic shareholder position." Months earlier, at Daily Journal's annual meeting in February 2023, he had called his Alibaba (BABA) investment one of the worst mistakes of his career. Both of those admissions were widely reported at the time. The Hyundai line was not.

Why it travels is simple. Nobody needs a textbook lesson in the disposition effect; everyone needs permission to recognize it in themselves, and a confession from the man who, when asked who in the hell needs a Rolex, rarely conceded anything to human weakness is as close to permission as it gets. He didn't dress up the mistake, and he didn't pretend it was a lesson. He said he was stubborn, waited to get back to even, and sold.

Munger died on Nov. 28, 2023, a month after the interview was published. The Hyundai answer takes him a few seconds. It is the one moment on the recording where the man who taught a generation of investors to watch for their own biases sounds like everyone else.

On the date of publication, Caleb Naysmith did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.