Thread by @HiddenValueGems

A great piece by Lindsell Train.

Makes you focus on what really matters in investing.

1️⃣ Long-term compounding (earnings growth) vs stock P/E.

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2️⃣ “ Most people are biased towards confirmation, to embrace the positive feedback of a share price going up. Rising prices (and, with the benefit of hindsight, peak valuations) imply successful approaches and quality companies.”

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3️⃣ The average US fund investor earns 1.4% pa less than the index funds they buy. “Most savers don't (or can't) stay fully invested, resulting in 'time out of the market' and behavioural traps for those 'timing the market'.”

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4️⃣ “Even perfect buy-and-hold passive investors experience effective turnover. Cap-weighted indices like the S&P500 suffer a surprising amount of activity... The S&P500 has seen well over 1,000 name changes since its inception. Does this activity add value? Not necessarily, as another Siegel study suggested: if you'd bought the original S&P500 at launch in 1957 and then did nothing, you'd have beaten the actual, regularly refreshed S&P by more than half a percent per annum. Similarly, the Voya Corporate Leaders Trust, launched in 1935 (with explicit rules to prohibit turnover) hasn't added a single new holding in 87 years, yet delivered double-digit nominal compound returns.”
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lindselltrain.com/application/fi…