The first rule of compounding: Never interrupt it unnecessarily.
Munger Monday #001
👋 CMQ Investors,
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📘 Why It Matters: Compounding is the most powerful, wealth-creating force on earth. However, compounding only works its magic if you leave it alone.
🌎 Real-World Example: Most investors interrupt the compounding process unnecessarily by selling shares of strong businesses in order to take profits or avoid volatility.
You pay taxes, losing 15–30% of your gains immediately.
You forfeit future compounding on the larger base.
If you fail to time your re-entry and the market bounces back, or doesn’t crash like you anticipated, you get punished again.
👉 Every time you sell early, you’re trading long-term wealth for short-term comfort.
✅ Actionable Takeaways
Hold enough cash in a high-yield savings account so you're never forced to sell assets in a downturn.
If you insist on ‘active’ trading, do it in a tax-advantaged account. Let your taxable account be your temple of inaction.
Before you sell any stock, ask: Am I interrupting the compounding process unnecessarily?
Before buying any stock, ask: “Can I confidently commit to not selling this for 10+ years?”—and only buy if the answer is an unshakable yes.
👋 Enjoying this post? Join 5,400+ rational investors who receive a fresh edition of “Munger Monday” every Monday via e-mail. 🎯 Apply It This Week: Take a look at your stock portfolio. Do you see any stocks you don’t feel confident holding for 10+ years?
🗒️ Franco’s Notes
Uninterrupted compounding is the secret to building long-term wealth.
In investing, doing nothing is often the most profitable move—activity leads to taxes, fees, and mistakes that interrupt compounding.
🎧 Related Content: Episode #41 of the CMQ Investing podcast is about the mathematical advantages of doing nothing. Listen for free on Spotify or Apple Podcasts or with the YouTube player below.
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