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Tackle Today: The First Rule of Compounding

March 15, 2021

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Hearken to the wisdom of Charlie Munger

Traders,

Charlie Munger is Warren Buffett’s partner in crime at Berkshire Hathaway. At 97 years old, he’s still sharp as a whip and unafraid to throw shade at the rampant speculation surrounding Tesla and Bitcoin. We’ll leave those comments for another day.

I was reading Morgan Housel’s book The Psychology of Money the other day and came across this Munger quote:

“The first rule of compounding is to never interrupt it unnecessarily.”

Go look at any chart illustrating the power of compounding and you’ll notice the steepest part of the hockey stick takes place on the far right of the graph. To get to the far right of the graph, you must last. Patience is required. A willingness to see your portfolio value rise, fall, and rise anew is required. You can’t get blown out or abandon ship every time the market has a correction.

Otherwise, you interrupt the compounding.

#TeamTackle


Chart of the Day

Net Worth of Warren Buffett


99% of Warren Buffett’s net worth came after the age of 50


Video of the day

Trade Masters

Berkshire Hathaway Chairman and CEO Warren Buffett speaks at the 2019 Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska. Buffett says compounding is one of the safest ways to make money over time and that preserving Berkshire’s legacy as a “compunding machine” is his primary motivation for waking up in the morning.


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