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  • Writer's pictureWilliam Webster

Racing cert.

Updated: Jan 15

Reinvestment of interest is the cornerstone of successful long term investment.

Einstein recognised compounding as the eighth wonder of the world (“…he who understands it, earns it…he who doesn’t… pays it.”)

The law of 72 shows that a return of 4.1% takes 18 years to double your money and a return of 1.60% takes 45 years.

Incidentally these are the yields on Diageo and Long Gilts. (You pays you money and takes your choice).

It’s a fact that long term assets that pay little or no return damage terminal value (retirement plans).

“Modest” fees and commissions do the same. Pay fees and commissions of 1.5% on a portfolio yielding 4.1% and it takes 27 years to double your money. That’s 9 years more.

Fund managers tell us not to worry. The key to performance is concentration. That’s what you’ve got to do. But something’s missing.

What’s the appetite of the investor for risk?

If it’s pension savings I bet it’s quite low – better a quiet old age not one shelf stacking. And herein is the problem. Why bet the house when you don’t need to? Some managers have a fantastic performance but what's the future? In the US investors asked this question and found no answer. Their safest bet - passive.

If you don’t fancy stocking shelves but really must have a flutter don’t put all your money on one horse or for that matter one rider- It’s the bookies that win. Good luck on Saturday’s National!

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