Stop Chasing Unicorns: The Right Way to Invest Small Amounts of Money

It's a question almost every new investor asks, and it was once put directly to one of the greatest financial minds of our time, Charlie Munger: "How do I invest small amounts of money and get a high return?"

Munger, the brilliant long-time partner of Warren Buffett during the explosive "growth phase" of Berkshire Hathaway, had a famously blunt answer (paraphrased here for impact):

"When I hear that kind of question, I have to say that’s not what we’re trying to do here."

That might sound discouraging, but it's actually the most valuable investment lesson you will ever hear. It immediately strips away the unrealistic expectation that every small investment must yield a massive, quick return.

The Real Goal: Quality Over Quantity

Munger’s response cuts to the core of value investing. Investing successfully—especially with smaller amounts of capital—is not about finding thousands of ideas or gambling on penny stocks.

It's about quality and conviction.

You don’t need but a few genuinely great investment ideas during your entire lifetime. Think about that: A few! You don't need a hot tip every week or a new stock every month.

The true challenge for the investor with small amounts of money is not generating a high return on the first $100; it's being ready to act on that rare, perfect opportunity when it finally arrives.

The Munger Mandate: Determination and Celerity

So, if you’re not chasing high returns on every dollar, what should you be doing? Munger’s philosophy gives us two clear action items:

1. Think Hard About Your Opportunities: Don't rush. Dedicate your energy to deeply understanding a few companies you believe in. Read their annual reports, study their competitive advantages, and determine if they are currently undervalued.

2. Act with Determination and Celerity: This is where the money is made. Once your research is done—once you have the high-conviction idea—you must act decisively and swiftly.

The problem for many small investors is they spend so much time searching for a magical, small investment that they miss the one or two big opportunities that come along. When you finally find that perfect stock—the one you truly understand—you need to buy it and be prepared to add to it over time.

Making Your Small Amounts Count

Investing small amounts is a journey of patience and homework. Your capital is precious, and every decision counts.

Stop worrying about making a quick 10x return on your first few shares. Focus instead on developing the discipline to think hard and the courage to act decisively when you identify that high-quality, long-term opportunity.

Got a question about a company you’re thinking hard about? Send us an email! We're here to help you move from thinking to acting with conviction.