Prolonging the Compounding

This is the first substack post on my investing journey called Pursuing the Right Tail. I expect that writing more will help me become a better investor which I expect to have a positive impact on my readers.

The importance of prolonging the compounding

The longer we compound our money and the higher rate of return, the more wealth we’ll accumulate. Sounds obvious, right?

One of the most important investing principles is not taking too much risk. I find this principle is sometimes overlooked, perhaps moreso during times like we are currently in when financial instruments of many varieties have produced great returns.

But the fact remains: you have to survive. You have to be around. You have to be invested to expose yourself to compounding’s goodness. You can’t always predict your best investments, the best days in the market…so you have to be there and be ready. My friend John Candeto would say that you need to be around to expose yourself to positive power laws whenever they might occur.

One of my favorite books that I’ve read recently is Fred Reichheld’s Winning on Purpose: The Unbeatable Strategy of Loving Customers.[1] Published just 4 years ago in 2021, he details many amazing companies like Amazon and Costco that have delighted their customers and produced outstanding returns for investors. What had a more lasting impact on me, however, was his profile of another company that consistently delighted its customers. This one was great until it wasn’t. This one took too much risk.