The Joys of Compounding: Reflections on Life and Learning for All Investors

There’s a Charlie Munger story about the art of patient investing, that quality that’s easy to talk about but hard to preach, and Gautum Baid tells it well. Munger, 99, has read Barron’s Magazine for over 50 years. In that span, he’s found only one actionable idea, a cheaply valued auto parts company, which he bought at $1 per share and sold a few years later for $15. He earned about $80 million in profit on the investment. 

Then he gave the $80 million to the value investor Li Lu, who turned it into more than $400 million. “I didn’t have a lot of ideas,” Munger said, “I didn’t find them easily, but I did pounce on one.”

The example illustrates a key tenant in Tom Lee’s investment process and Baid’s international bestseller, The Joys of Compounding, one of our favorite books. The value of true patience is hard to overstate in an investing landscape of tons of noise and very little signal. Quality investments don’t always come along, so the ability to sit, sit, and then pounce is a trait reserved to a select few. Extreme patience, deferred gratification, and the courage to act boldly all contributed to Munger’s enormous success, helping to make him a billionaire. As Munger says, it takes character to sit with cash and do nothing for months, sometimes years, until the right opportunities come knocking. In investing, you don’t get rewarded for activity. 

In this Signal From Noise, we highlight this and other timeless lessons from Baid’s book, a master class in investing, mental models, frameworks, and enjoying the benefits of compounding in all areas of life. Baid is the fund manager and managing partner at Stellar Wealth Partners India Fund, an investment partnership modeled after the original Warren Buffett partnership fee structure. The Fund is based in the US and invests in listed Indian equities with a long-term, fundamental, and value-oriented approach. 

Here are the highlights.

Delayed gratification 

Munger, Warren Buffett, Joel Greenblatt, and other legendary investors like Peter Lynch didn’t build fortunes by panicking during recessions, selling out in 2008 or 2020, or making impulse investments based on a few negative headlines. No, they built fortunes partly because of an uncanny ability to ignore the noise, gloomy soundbites, and pundits. They compounded their wealth again and again, thanks to delayed gratification. As Baid explains, many great investors beat the benchmark S&P 500 over many years because they maintain a long-term view of several years, not weeks, months, or quarters. Great investors also tend to think like owners who buy a business, not merely a stock.

New York stylized skyline
Get instant access to this report
Complimentary Research to all of our visitors! Subscribe to receive three types of reports. Receive FSI Academy, Community Questions and Signal from Noise to you inbox every month.

Please enter your name.

Get Access Now

What is FS Insight?

FS Insight is a market-leading, independent research boutique. We are experts in U.S. macro market strategy research and have leveraged those fundamental market insights to become leading pioneers of digital assets and blockchain research.

View of Tom Lee icon

Tom Lee's View

Proprietary roadmap and tools to navigate and outperform the equity market.

Macro and Technical Strategy icon

Macro and Technical Strategy

Our approach helps investors identify inflection points and changes in equity leadership.

Deep Research icon

Deep Research

Our pioneering research provides an understanding of fundamental valuations and risks, and critical benchmarking tools.

Videos icon

Videos

Our macro and crypto videos give subscribers a quick and easy-to-understand audiovisual updates on our latest research and views.

US Policy Analysis icon

US Policy Analysis

Our 40-year D.C. veteran strategist cuts through the rhetoric to give investors the insight they need.

Signal from Noise icon

Signal from Noise

A gimlet-eyed look at financial markets, with timely investment ideas in concise and engaging prose.

Disclosures (show)

Want to receive Regular Market Updates to your Inbox?

By continuing, you agree to the Terms of Service and Privacy Policy.

Events

Trending tickers in our research