Some old super smart dead dude said this:
I think most of us don't really understand just how powerful anything that compounds really is. We've all heard the example of a snowball that starts small and then turns into an avalanche or something like that.
We all nod in agreement and keep moving but I don't think it actually registers just how amazing that really is.
I started thinking about this because a friend of mine, Tolu of Tolusnotes, wrote an article about investing and then stopping. Which absolutely BLEW MY MIND!
Because who actually thinks about not investing?
Absolutely no one.
We only think about the wealth building phase and not the wealth acquisition stage.
Anyway, why is it even possible to invest early and then not have to invest later on. It is simply because of compounding and how it can keep moving without us having to do anything. In physics this is called Inertia, “An object in motions stays in motion unless acted upon." It's such an amazing thing to learn about (Yes, I'm a science nerd).
That article has remained top of mind for me for an entire week after reading it. I just couldn't stop thinking about it. Then while at the gym, the thought of compounding came back up (I'm actually writing this portion in the gym). I had a question pop in my head, What is the number 1 goal of working out?
Is it to get an intense workout?
To be healthy?
To look good when you take your shirt off?
To show off?
To eat whatever you want whenever you want?
Trick Question! It's none of the above!!
The goal when you workout is to come back the next day AND the day after that AND the day after that AND the day after that. It means that you focus on having good form when performing any exercises. You use the appropriate weight for each exercise performed. You do the appropriate number of reps so as not to over-burden yourself. It means focusing on your workout regimen and not trying to match some random dude you saw on Instagram or in the gym. It mean focusing on YOU and getting the right mind muscle connection (ugh I feel weird saying that lol).
The goal is to do everything in your power BEFORE, DURING, and AFTER your workout to ensure that nothing causes you to stop working out. Meaning eating the proper meals so you have the energy to perform. Giving yourself the proper amount of sleep so you are not tired and super sore. Stretching after working out so your muscles don’t tense up (shout-out to my sister for beating this one into me and my brother). All of these things seem separate but they all add up.
Because as much as one SUPER intense workout day is good.
10 Workout days are better
20 Even More So
40 Better Still
80 Great
160 Excellent
320 AMAZING!!
Each day you workout, you get a bit stronger. You learn a bit more about how to perform different exercise. But even more importantly, you learn about your body. You learn the areas that are lacking and need extra attention. You also learn the areas that are really strong but need to be pushed further.
Too often when I'm in the gym, I'll see a new guy. Who is going all out and loading up on weights, using horrible form just to get the weight up. Whenever someone tries to talk to the guy usually he doesn’t listen. In my head I just say, "Yeah, I'm not gonna see him for a while after this". Because best case scenario he gets seriously sore and can't move for a while so he doesn’t workout for a while which interrupts the compounding effect. Since he is hurting, he fills his time with other things and eventually working out ends up on the back burner. Or worst case scenario he hurts himself and has a bad taste of what working out is and just decides it is not for him.
Or the other way this plays out is people will ask, “How do I loose weight?”
You say something along the line of “Find healthy foods you like (i.e. Salmon, broccoli, sweet potatoes my favorite), go to the gym 3-5 times a week, and find ways to stay active (like parking really far when you go out).”
They come back with, “I heard about this keto diet (paleo, carnivore, cleanse, insert whatever trendy diet is all the hype) and they said I can loose weight in a month. So I will do that.”
Everyone just wants a quick fix and we ignore the power of moving in the right direction one day at a time. Which COMPOUNDS to get you to the destination you want to get to.
It's the same way with investing.
Too often we want to hit the BIG HOME RUN but we end up missing all the daily singles that our portfolio can accumulate overtime just by doing the BASICS. People on TikTok (btw you should really be watching my not so hilarious videos) ask me all the time, "What's the best investment that I can make?"
I say something similar to this most of the time.
"First yourself so you have consistent income and extra money to invest. Then if you have any debt get rid of it (especially high interest debt aka anything above 4%). If you don’t have an emergency fund, get that situated (start with like $1500). Then just set up an IRA and track the entire market, automate it, and forget about it for the next 20-40 years."
But I will say 90% of people don’t listen to that advice. They want a stock tip to give them the next GameStop or the next AMC or Doge or whatever.
But just like with the gym, they go into investing without the proper form and with no plan to have a repeatable action. They gamble on penny stocks or poop coins. Then proceed to loose their money and then never invest again.
Our goal as investors is to ensure that we do everything in our power to ensure compounding is working FOR US and NOT against US.
I will take a lifetime of consistent returns over One hit wonders.
As Charlie Munger says, "Anyone can be rich, he just needs the luck of time on his side."
So the question I leave you with,
IS THE POWER COMPOUNDING WORKING FOR YOU OR AGAINST YOU?
Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾
-Kelechi