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On the benefits of compounding:
Coca Cola delivered a 265 million percent return by compounding at 16% for 98 years.
Excluding dividend income, an initial investment of $10,000 in the S&P 500 on January 1, 1926, would have grown to more than $1.7 million as 2017 began. But with dividends reinvested, that investment would have grown to some $59.1 million!
John C. Bogle • The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)
This leads to a value of $104 million in owner earnings in year 10. Let’s assume that the market pays an average multiple of 15× on owner earnings for this type of business and that no valuation rerating or derating of the business occurs in the interim period. This gives us a market value of $1.56 billion in year 10. Compared with the current mark
... See moreGautam Baid • The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, Revised and Updated (Heilbrunn Center for Graham & Dodd Investing Series)
Please don’t underestimate the power of compounding the generous returns earned by our businesses. Let’s assume that the stocks of our corporations earn a return of 7 percent per year. Compounded at that rate over a decade, each $1.00 initially invested grows to $2.00; over two decades, to $4.00; over three decades, to $7.50; over four decades, to
... See moreJohn C. Bogle • The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)
Let’s go back to Grandpa and his mattress stash. If he invested that original $100, it’d be worth $106 by the end of the first year. It’s pretty hard to get excited about six bucks. But the following year, the investment returns would start accruing on that $6, as well as on the original investment. After three years, he’d be earning returns on top
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