“Compounding”
There have been five distinct ice ages over the very long history of the planet. Each turned the earth into a giant snowball. For as long as humans studied these phenomenon, the tilt of the earth’s axis away from the sun was thought to be the cause.
There have been five distinct ice ages over the very long history of the planet. Each turned the earth into a giant snowball. For as long as humans studied these phenomenon, the tilt of the earth’s axis away from the sun was thought to be the cause.
Cool summers meant the winter snow didn’t melt. When the snow didn’t melt it reflected more heat away from the earth, cooling the planet further, and leading to more snow the next winter. And when there was more winter snow
accumulation, there was less summer snowmelt. And around and around it went.
It’s not intuitive to think that you start with something as benign and tiny as a moderately cool summer that leads eventually to the entire planet being covered in snow,
It’s not intuitive to think that you start with something as benign and tiny as a moderately cool summer that leads eventually to the entire planet being covered in snow,
but that was exactly what was happening,” Housel said.
You start with a normal planet, you have a cool summer, and before long — tens of thousands of years — the whole planet is covered in snow.”
You start with a normal planet, you have a cool summer, and before long — tens of thousands of years — the whole planet is covered in snow.”
Which is how compounding works.
You start with something that is so meaningless and benign, and a change in circumstances that doesn’t seem to make any difference, that is easy to overlook because it’s not intuitive,” he said.
You start with something that is so meaningless and benign, and a change in circumstances that doesn’t seem to make any difference, that is easy to overlook because it’s not intuitive,” he said.
But over a period of time, it adds up to something truly extraordinary. And that, of course, is so true in investing as well.”
To drive home the point, he noted that Warren Buffett started investing at age 11 and continues today at age 90.
To drive home the point, he noted that Warren Buffett started investing at age 11 and continues today at age 90.
So how much of his net worth came after his 50th birthday? About 96%.
“If he had started at 25 like a normal person and retired at 65,” Housel said, “his net worth would be $11.7 million not $90 billion.
“If he had started at 25 like a normal person and retired at 65,” Housel said, “his net worth would be $11.7 million not $90 billion.
Investing mistakes come from the question: “What will happen next?” While most investing fortunes come from asking: “How long can I stay invested for?”
He quipped that there are 2,000 books on Amazon devoted to answering how Buffett became so successful but there has never been one simply called: “The reason he is so successful is because he has been investing for three-quarters of a century.”
That is 99.9% of the explanation for how Buffett has gotten to where he is now, Ho. “That answer is not intuitive and it’s too simple for smart people to take seriously, and so it tends to go overlooked.”
#RetweeetPlease it may help someone
#RetweeetPlease it may help someone
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