Warren Buffet's Secret - The Power of Compounding

Understanding both the power of compound return and the difficulty of getting it is the heart and soul of understanding a lot of things – Charlie Munger

Compounding is one of the wonders of the world and Warren Buffet has used it to dramatic effect in getting the value of his investments to grow at spectacular rates. It is probably his greatest secret and the one that eludes the majority of students of Buffettelogy.

Warrant believes that compounding is the secret to getting really rich. Here’s how compounding can make you rich. Shown below is what 100,0000 would be worth in ten, twenty, and thirty years if allowed to compound tax-free at an annual rate of 10,15,20%.

The difference that just a few percentage points can make over a long period of time is astonishing. Your 100,000 compounding at an annual rate of return of 15% a year for 30 years will grow to 6,621,177.

Go from 15% to 20% and you will find that 1,00,000 will grow to 2,37,37,631 - Yes! 23 Million. It’s amazing, isn’t it? A difference of just 5 to 10 percentage points can have a tremendous effect on your total gains.

The point is very simple. Over longer time frames, the impact of compounding gets more visible. And that is why investment experts say "Invest for the long term".

NSE Trading Holidays 2024

Trading holidays for the calendar year 2024. The National Stock Exchange of India (NSE) has notified trading holidays for the calendar year 2024 as below: Muhurat Trading: Timings of Muhurat Trading shall be notified subsequently.

Historical BSE Sensex returns - updated 2013

We have already seen the historical returns of the BSE Sensex, which indicated an average return of about 20% per year, despite many yearly returns varying from -20% to +60%. The following table shows BSE Sensex historical data - open, close and the yearly returns of the sensex from 2000 to 2012. There are some interesting points to note from the above table. Post 2008 crash of about 50% and 2011 negative returns of 24%, markets have given positive returns of 81% and 25%. Also the average returns for the past years is about 20% despite the markets being down 24%. The lesson is pretty much clear - long term investing pays and one need not bother too much about the ups and downs of the markets. During the past few years, the returns from investing in individual stocks have been varied. Despite markets being at 2 year highs, only a few stocks are at similar highs, while most of them are still languishing well below their historical highs and are down anywhere between 8

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