The Best Investment Most People Will Never Make

The best financial decision most people will never make is to stop trying to beat the market. Charlie Munger, who spent decades building one of the greatest investment records in history alongside Warren Buffett, never invested this way himself. He concentrated wealth in a few exceptional businesses. Yet he told ordinary investors to do the one thing he didn’t: buy a low-cost S&P 500 index fund and hold it indefinitely.

Munger saw the refusal to do so not as ambition but as delusion. Most investors believe they’re above average. The market doesn’t care. The active management industry charges high fees for results that, in aggregate, fail to match the index. Those fees are a permanent tax on returns—money transferred from investors to managers, year after year.

An index fund removes that friction. It also removes the need for skill. Munger preferred concentration, but only for those who truly understand a business better than the market. For everyone else, broad diversification isn’t settling. It’s rational. It’s admitting ignorance—and doing so in a way that wins over time.

The psychological advantage is just as important. Most people can’t sit still while others get rich. They trade too much, sell in downturns, and chase performance. An index fund negates those impulses. When you own everything, there’s nothing to switch to. No single stock can collapse your portfolio. The structure enforces discipline.

Then comes tax efficiency. S&P 500 index funds have low turnover. Fewer trades mean fewer taxable events. More gains stay invested. Over decades, compounding amplifies that edge into a substantial difference in wealth.

Munger did warn of a side effect: passive investing has concentrated voting power in three or four asset managers, giving them outsized influence over nearly every major U.S. company. He saw that as a societal issue, not a reason for individuals to abandon index funds.

His message was clear. The skills to beat the market are rare. The cost of failure is high. For most people, the smartest move is the simplest one—buy the market, stay in it, and do nothing.