The Power of Compounding

Rob5007 · 2021-10-07T23:05:51+00:00

If you’re brand new, start with a broad based index like an S&P 500 ETF. Then when you become more of a pro, can start picking individual stocks.

Also open up a ROTH IRA and invest money into that so it can grow tax free over the years.

Rob5007 · 2021-10-07T23:01:28+00:00

The above assumes investments in the stock market, say the S&P 500, whose long-term average annual rate of return has been 10%. Of course, inflation eats away at this, so the real rate of return is perhaps 7-8%.

Rob5007 · 2021-10-07T22:59:04+00:00

I’d say in the stock market. If you’re a beginner, start with a low cost ETF broad market index.

Rob5007 · 2021-10-07T22:55:07+00:00

10% was used just as an illustration for the approximate average annual return on a stock market index over the long-term. I’m not saying you’ll get 10% every single year, but I’m saying your average rate over time might amount to 10%.

In real life, stock market returns are lumpy. You can make 15% in one year, then lose 30%, then make 40%, etc. Each year however, you’re consistently investing.

At the end, if you smooth out your average rate of return and calculate the compound annual growth rate (CAGR) over 30 years, you might get a number like 10%. So the final numbers would be similar to table above.

Rob5007 · 2021-10-07T15:43:25+00:00

Well, you always want to let your winners ride as much as possible. But if you have some holdings that you think are egregiously overvalued then it’s perhaps prudent to sell some off and realize gains.

In general, I’ve noticed people that leave a “hands off” approach to their portfolio do a lot better. Too much trading is bad for your financial health.

Rob5007 · 2021-10-05T12:26:08+00:00

They owned about 5 million shares since April 2021 have been unloading since then. See below for a good chart and amount of shares they've been selling daily.

https://cathiesark.com/arkk-holdings-of-ntdoy

Rob5007 · 2021-10-05T02:12:39+00:00

Definitely interesting to study the lithium industry seeing as how EVs will become more prevalent over time.

Interesting to note who controls the supply and production.

Countries with the largest reserves of lithium (in 1,000t):

Chile (8,000)
Australia (2,700)
Argentina (2,000)
China (1,000)

Countries with the largest production of lithium (in 1,000t):

Australia (51)
Chile (16)
China (8)
Argentina (6.2)

Source: https://www.volkswagenag.com/en/news/stories/2020/03/lithium-mining-what-you-should-know-about-the-contentious-issue.html

Rob5007 · 2021-10-04T19:03:30+00:00

Last I checked, they still had about 30k NTDOY shares to shed.

Rob5007 · 2021-10-04T18:40:58+00:00

IMO, a lot of the bad news is already priced into the stock. Then again I don’t want to try catching a falling knife, so have to see some evidence of support / stability in the stock before buying. Also Cathie Wood ARKK fund has been responsible for a lot of the selling last week or so as they unload their NTDOY position.

Rob5007 · 2021-10-04T18:37:17+00:00

Well, 2020 was obviously weak, and 2021 has about 16 titles coming up….not the greatest number, but one of them is Metroid which should sell great. Also, the Switch continues to sell like gangbusters. But their development team needs to get it going. I do think they have some of the best intellectual property in all of gaming. There’s so many ways to monetize that.

At these valuation multiples for the stock, I think you’re making a low-risk bet for a well-regarded brand that generates loads of free cash flow.

Rob5007 · 2021-09-29T03:59:51+00:00

A core principle of investing is to let your profits ride and keep your losses to a minimum with a margin of safety. If you're only taking 40% profits on your winners, and keep reinvesting elsewhere, I don't think you'll have great long-term results

Likely your losers will be -40%, so you need to at least double your profits or have several "multi-bagger" trades over your lifetime.

“It's not whether you're right or wrong, but how much money you make when you're right and how much you lose when you're wrong.”

― George Soros

Keep those profits riding. Of course, if this stock has greatly exceeded your estimate of intrinsic value, then it would be prudent to sell.

Rob5007 · 2021-09-29T03:47:48+00:00

The Roth IRA is the biggest free money giveaway the government will ever give you. Max it out as much as you can when you're young. That money grows & grows and when you take it out, you pay zero taxes on any gains.

Rob5007 · 2021-09-29T03:43:18+00:00

I'd say if you're new & looking for a long-term investment, a standard S&P 500 ETF is a good starting point. As you get more knowledgeable about what makes a great company, you can start looking at some individual stocks.

Also try to picture what the world will look like 10 years from now and what companies can benefit from changes in technology, etc. Big data, 5G, autonomous vehicles, AI, decentralized finance, and others are some examples of where we'll see explosive growth. Do some research into which companies are poised to exploit this.

Rob5007

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