Compounding by Investment Master Class

“The following is an immutable, and what should be perceived as sobering, law of compounding.  A single 100 percent loss can wipe out an entire lifetime of cumulative gains.  Compounding is not an equal-opportunity mechanism. Its rewards and penalties are asymmetrical” Frank Martin


Corsair Took A Hit From Small-Cap Underperformance In Q3; Says Evergrande Not The Next Lehman Brothers

Corsair CapitalCorsair Capital was down by about 3.5% net for the third quarter, bringing its year-to-date return to 13.3% net. Corsair Select lost 9.1% net, bringing its year-to-date performance to 15.3% net. The HFRI – EHI was down 0.5% for the third quarter but is up 11.5% year to date, while the S&P 500 returned 0.6% Read More

“It is obvious that a variation of merely a few percentage points has an enormous effect on the success of a compounding (investment) program. It is also obvious that this effect mushrooms as the period lengthens. If over a meaningful period of time, Buffett Partnership can achieve an edge of even a modest number of percentage points over the major investment media, its function will be fulfilled” Warren Buffett, Partnership Letter 1964

“Over time, a two-percentage-point advantage makes a huge difference to returns.” Ralph Wanger


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Compounding is the magic of investing” Jim Rogers

"The effects of compounding even moderate returns over many years are compelling, if not downright mind boggling"  Seth Klarman

“Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things” Charlie Munger

“Long-term compounding is an investor’s best friend, so why get in its way” Guy Spier

"The sooner you start, the more compounding can do for you.  If, beginning at the age of twenty, you sock away just $100 a month in stocks, and your portfolio compounds at 10%, which is what stocks have provided historically, you will be a millionaire when you retire at sixty-five"  Ralph Wanger

“Remember the power of compounding. You don’t need to stretch for returns to grow your capital over the course of your life.” Walter Schloss

"Compounding is one of my favorite words. Compounding is powerful. Warren Buffett did not become one of the wealthiest men in the world by suddenly striking gold in a single highly successful investment, but rather by compounding the value of Berkshire Hathaway at a 20 percent or so rate for 45 years. If an investor can achieve an average annual return of 20 percent, then, after 45 years, an initial investment of $1 million will appreciate to $3.6 billion. Wow! " Ed Wachenheim

"All I know is that if you can end up with a 20% track record over a longer period of time, the compound rates of return are such that the amounts are staggering" Peter Cundill

“Einstein called compounding the eighth wonder of the world and our mission is to harness this dynamic for our investors benefit." Christopher Begg

“The tyranny of negative compounding returns maybe the hardest lesson that far too many investors never master” David Rolfe

"Underlying our investment values is the principle that the mathematics of compounding demands putting a high priority on avoiding substantial permanent losses. That’s why we’re committed to owning high-quality businesses in industries we understand and can underwrite. It’s also why we put the emphasis we do on risk management." Adam Weiss

“When it comes to compounding, I’m not sure everyone understands that percentage losses and gains are not equal. I’ve always managed to avoid the large losses. Imagine something as simple as that being one of your secret sauces” Frank Martin

“The power of compounding is so great that our first job as investors is to avoid anything that might short circuit it” Ira Rothberg

"Striving for sustained, uninterrupted compounding over long periods of time is smart investing, and that’s precisely our goal.  Many people think of us as a “value investor” and others ask whether we are a value or a growth investor. We’ve started to say, we’re neither, we are a compounding investor." Chuck Akre

"It's hard to believe that over the last 100 years the S&P 500 rose 273-fold, but adjusted for dividends it rose 18,520-fold." Morgan Housel

"The great thing about compounding is that in order for it to be a thousand bagger it was only a five hundred bagger just halfway before there, and a 250 bagger and so on"  Chuck Akre

"Investing is simply maximizing the rate of compounding for as long as capital can be employed net of fees and taxes. What strikes us as strange is how little we hear about compounding with regard to investing. We find the short-term perspective affecting the collective market psyche is focused on direction and immediate results that often limit the ability to truly accomplish outstanding rates of compounding" Christopher Begg

"Compounding matters and does so far more than people expect.  The human brain thinks in a linear way which means that if we were asked to estimate what 10.22% compounded over 100 years would be then our answer is likely to be closer to 1,022% than 1,679,600%, something economists call exponential growth bias.  This means that compounding is often underestimated and should be at the heart of long-term investing"  Marathon Asset Management

"I usually ask my friends this question: Which would you rather have, $750,000 today or the outcome of doubling a penny a day for 30 days.  What do I hear? Penny.  So that's the question.  Compounding our capital is what we're after, that's what makes it a great investment for us.  What's the value of compounding? Well the answer in this case is simply astounding.  Double a penny a day for 30 days gets you, who knows, $10 million, $737,000 change"  Chuck Akre

"Compounding should be the overarching mission of investing activities for capital with a multi-year time horizon" Christopher Begg

"Consider the Indians of Manhattan, who in 1626 sold all their real estate to a group of immigrants for $24 in trinkets and beads. For 362 years the Indians have been the subjects of cruel jokes because of it - but it turns out they may have made a better deal than the buyers who got the island. At 8 percent interest on $24 (note: let's suspend our disbelief and assume they converted the trinkets to cash) compounded over all those years, the Indians would have built up a net worth just short of $30 trillion, while the latest tax records from the Borough of Manhattan show the real estate to be worth only $28.1 billion. Give Manhattan the benefit of the doubt: that $28.1 billion is the assessed value, and for all anybody knows it may be worth twice that on the open market.  Either way, the Indians could be ahead by $29 trillion and change.. What a difference a couple of percentage point can make, compounded over three centuries"  Peter Lynch


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