Here's the most overlooked fact about how Warren Buffett amassed his fortune, says a money expert. (via CNBCMakeIt)
, founder of the hedge fund Renaissance Technologies, has compounded money at 66% annually since 1988. No one comes close to this record. As we just saw, Buffett has compounded at roughly 22% annually, a third as much.Why the difference, if Simons is such a better investor? Because Simons did not find his investment stride until he was 50 years old. He's had less than half as many years to compound as Buffett.
The danger here is that when compounding isn't intuitive, we often ignore its potential and focus on solving problems through other means — because we're overthinking, but because we rarely stop to consider compounding potential.There are books on economic cycles, trading strategies and sector bets. But the most powerful and important book should be called "Shut Up And Wait." It's just one page with a long-term chart of economic growth.
The practical takeaway is that the counterintuitiveness of compounding may be responsible for the majority of disappointing trades, bad strategies and successful investing attempts. You can't blame people for devoting all their effort to trying to earn the highest investment returns. It intuitively seems like the best way to get rich.
But good investing isn't necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can't be repeated. It's about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That's when compounding runs wild.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Warren Buffett's $570 million bet on Snowflake shows he completely trusts his deputies, investor Jake Taylor says | Markets InsiderBill Pugliano/Getty Berkshire Hathaway's $570 million bet on Snowflake shows CEO Warren Buffett completely trusts his two portfolio managers, ...
Read more »
Warren Buffett's $570 million bet on Snowflake shows he completely trusts his deputies, investor Jake Taylor says | Markets InsiderBill Pugliano/Getty Berkshire Hathaway's $570 million bet on Snowflake shows CEO Warren Buffett completely trusts his two portfolio managers, ...
Read more »
Stop 'demonizing' college students for coronavirus spread, mental health experts urgeStudents and mental health experts say that young people are getting a bad rap.
Read more »
Unwillingness to spend money is a disadvantage for the U.S. in its tech race with China, expert saysWashington in recent years stepped up efforts to put pressure on China's technology firms, including Huawei and ByteDance.
Read more »