Warren Buffett’s right-hand man offers 3 tips for investors to boost long-term returns

Ryan Ermey | CNBC | March 2nd, 2020

Munger went on to compare such investing behavior to gambling. He isn’t wrong to do so, says Sam Huszczo, a certified financial planner and founder of SGH Wealth Management in Southfield, Michigan. “Every investment should have a purpose. If you can’t come up with a purpose for why you’re investing that money, you’re a rudderless ship,” he says. “Then you’re approaching it like gambling. You’re just hoping you get lucky.”

So should you dump your index funds in favor of a few choice stocks? Probably not, unless you’ve made a multibillion-dollar career in the stock market, says Benz. “If you’re Warren Buffett or Charlie Munger, that’s legitimate,” she says. “If you’re just learning about stocks, not so much.”

But Munger’s thoughts do apply to the small portion of your portfolio you can use to augment your diversified core holding, says Huszczo. “That 5% to 10% of your portfolio can be those really high-conviction picks,” he says. “Just don’t put more at risk on one or two names than you’re willing to lose.”