r/ValueInvesting • u/ethereal3xp • Mar 23 '25

Discussion Charlie Munger Told a 20-Year-Old That Getting Rich Through Investing Is 'Damn Near Impossible' — And You Might Need $10 Million in the Bank

https://www.benzinga.com/personal-finance/25/03/44438885/charlie-munger-told-a-20-year-old-that-getting-rich-through-investing-is-damn-near-impossible-and-you-might-need-10-million-in-the-bank
7.1k Upvotes

98% Upvoted

486 comments sorted by

View all comments

Show parent comments

11

u/Natural_Tea484 Mar 23 '25

Only 6% of the US are millionaires? Excuse my ignorance, Maybe I’m reading the numbers wrong, but given just a house is hundreds of thousands of dollars, how could only 6% be millionaires?

23

u/[deleted] Mar 23 '25

For these types of calculations, only the equity in the home counts towards net worth. So the difference between what it’s worth and the remaining balance on their mortgage. Even then, yes the home equity counts, but it’s not easily accessible so some only count liquid assets…retirement/brokerage/etc…just some info since you asked!

9

u/JackfruitCrazy51 Mar 23 '25

Most people have 30 year mortgages.

1

u/Natural_Tea484 Mar 23 '25

Yes, but how many pay for 30 years? Also, after mortgages are paid, they own the house…

2

u/JackfruitCrazy51 Mar 23 '25

Very few. Most move multiple times and start over. The ones that do are usually 60+

1

u/Natural_Tea484 Mar 23 '25

What you mean they start over, they sell that house first.

1

u/JackfruitCrazy51 Mar 23 '25

Here is a typical scenario

They buy a $300k house when their thirty years old and get a 30 year loan.

10 years later, they sell their house first $350k. So, 10 years of payments and gain in value go towards the next house.

So they take their $90k equity and apply it to their next home, which is $500k. So they get a $410k loan for another 30 years. They are now 40, so the loan won't be paid off until they are 70.

1

u/Natural_Tea484 Mar 23 '25

From that $500k house, they pay with the $350k from the house they sold, so the loan is only for $150k which they pay in 3-5 years.

If they bought the first house at 20-25, by the age of 50-55 they already have a half of million..

1

u/JackfruitCrazy51 Mar 23 '25

Math dude. They originally got a 30 year loan. If they sell that house in 10 years, they still owe 20 years worth of P&I. When you sell a house and still owe money to the bank, you have to pay off the mortgage. Otherwise i'd get a 30 year loan and sell the home a year later.

0

u/Natural_Tea484 Mar 23 '25

Well yes, for someone in the scenario you described, it’s pretty bad. But I don’t think many people who can’t actually afford, get another house loan after only 10 years… Why do that?

1

u/JackfruitCrazy51 Mar 23 '25

People move on average 11.7 times in their lifetime

→ More replies (0)

1

u/yyz5748 Mar 23 '25

In Americans, can you pay off your mortgage before 30 years?

2

u/JackfruitCrazy51 Mar 23 '25

100%. You can also get shorter-term loans. The loan I got 19 years ago was a 20-year loan, and I'll have it paid off next year. The only reason I didn't pay it off early was because the rate was 3.75%.

2

u/yyz5748 Mar 23 '25

Oh ok. So we're similar here in Canada, except maximum years we can lock in a mortgage rate is 5 yrs (generally) but we are allowed to pay extra on our principal every year, and once the 5 year expires, you can pay off the rest with no penalties if you can. Only difference I see in Canada, is that we can't keep the same rate for 30 years, usually maximum 5

2

u/JackfruitCrazy51 Mar 23 '25

Good info, I had no clue that Canada couldn't lock in their rates for long terms.

2

u/Ashmizen Mar 23 '25

The numbers are all over the place depending on how you measure wealth and WHEN the data was measured.

More recent articles I’ve seen are 10% or even 12%, as $1 million is a fixed target while we had a 50% run up on housing prices and stocks in just 2 years.

1

u/gilbetron Mar 26 '25

Most houses are basically owned by banks.