Asymmetric risk and compounding for wealth creation during bull and bear markets
The two main contributors to wealth creation are:
a) Asymmetric risk investments
b) Compounding
It’s very important to note, specially during crisis like the coronavirus affecting markets so heavily, that the stock market is one of the most asymmetric risk investments possible, so a fantastic source of wealth creation: you can triple (+200%), quadruple (+300%), quintuple (+400%) ., 1000%, 5000%, … without limit. On the other side you can only lose all you invest, that is (-100%).
Yes, it’s hard to win +200% or +300%, let alone +1000% but I’ve done it and I’m no genius, but it’s also hard to lose -100%, almost impossible if you diversify and invest long term.
So, no matter the crisis, no matter the market reaction, keep you head cold and keep investing in great companies for the long term. Even more during recessions. It’s impossible to time the market, so don’t stop investing because of the negative or positive news.
And compounding …. compounding will take care of the rest.
Maybe the greatest benefit of the coronavirus crisis is that many more people will understand what exponential growth and compounding mean. Sadly because of the negative effects of a virus exponential propagation.
So,
Compound non-stop (invest long term, minimum 5–10 years and keep adding slowly but steadily)
Ignore the daily news.
Invest only on great businesses and brands.
My current ones include Shopify $SHOP, Tesla $TSLA, Materialise $MTLS, Google $GOOGL, Facebook $FB, Nike $NKE , Grifols $GRFS, Pinterest $PINS, Solar Edge $SEDG, Sun Power $SPWR and Crispr Therapeutics $CRSP but I plan on keep adding more or adding more to them.
Stay safe
Know more about Carles at www.carlescarrera.com
