Charlie Munger said get-rich gurus teaching young people to trade is like getting them on 'heroin' — was tired of people who 'mislead you on purpose.' How he urged investors to build wealth

Financial misinformation

There’s a financial literacy problem across the nation. According to the 2024 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index), U.S. adults correctly answered only 48% of the 28 index personal finance questions on average. The index notes this figure has hovered around the 50% mark since the inaugural survey in 2017.

There could be many reasons for this, but one place to look is where people get their information. A whopping 79% of American millennials and Gen Z have gotten financial advice from social media, according to a 2023 survey commissioned by Forbes Advisor.

It’s impossible to measure the accuracy rate of social media gurus, but some influencers use their clout and content to promote their own products and services, which is a business model Munger doesn’t appreciate.

He thought it was silly “when you’re already rich to make your money by encouraging people to get rich by trading,” Munger told shareholders. “There are [also] people on TV and they say ‘I have this book that will teach you how to make 300% a year and all you have to do is pay for shipping.’”

He added: “They mislead you on purpose and I get tired of it. I don’t think it’s right that we deliberately mislead people as much as we do.”

Bad financial advice can have tangible consequences.

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Low-risk investing

Buffett and Munger often talked about the virtues of passive investing. Buffett believes most active investors would fail to outperform an index, so instead it might be best for the common investor to put their money in an index fund. Munger also talked up the virtues of everyday people investing in index funds in the past.

With this in mind, investors may want to consider a safe and relatively consistent index fund to build wealth over time. For example, since its introduction, the S&P 500 has delivered an average annual return of over 10%, according to the Official Data Foundation.