It is always preferable to invest in compounders and growth companies than just any bargains or cheap non-quality stocks..

Given a choice:

Choose compounders and growth.

They are always better than lousy companies that are available at low prices.

Those who choose these lousy companies at low price may find many of them not so rewarding.

A few though rewarding, but they will soon realise that this strategy gives limited upsides.

Don't just focus on cheapness.

Always look for great quality growing companies to buy at cheap prices.

Seek out the ones that will give you the 10 baggers in 10 years.



What does a 10 bagger investment looks like?

$1000 invested today growing to $10,000 in 10 years.

Initial capital  $1000
1st doubling  $2000  ($1,000 x 2^1)
2nd doubling $4000  ($1,000 x 2^2)
3rd doubling  $8000  ($1,000 x 2^3)
4th doubling  $16,000 ($1,000 x 2^4)

Basically, you aim to double your capital every 3rd year.

Essentially, you need to grow your capital at a rate of 24% annually.  (Rule of 72:   72/3 = 24%)

Terry Smith:  Choose Quality Stocks Over Value Investing (Morningstar)

Mohnish Pabrai Lecture at Boston College on the Power of Compounding ...

At an early age, Warren Buffett understood the power of compounding.

He soon realised as early as 11 years old, that becoming first in class is not going to make him very rich but compounding through asset acquisition will make him very rich.




Starting EARLY in your savings and investing is MOST IMPORTANT.

Assumptions:
Compounding at 7% per year.
Rule of 72
Money will double in 10 years.


Mr. EARLY saves and invests early.

At age of 20, he saves and invests 10,000.

Age 80, he will have compounded over 60 years.

Every 10 years his money doubles.

This is 6 doubling = 2^6 = 2^3 x 2^3 = 8 x 8 = 64

At age of 80, his money of 10,000 will have grown to 64 x 10,000 = 640,000.



Mr. LATE BY TEN YEARS saves and invests 10 years later than Mr. EARLY.

At age of 30, he saves and invests also 10,000.

Age 80, he will have compounded over 50 years.

Every 10 years his money doubles.

This is 5 doubling = 2^5 = 2^3 x 2^2 = 8 x 4 = 32

At age of 80, his money of 10,000 will have grown to 32 x 10,000 = 320,000.


By investing early by 10 years the same 10,000 will have grown an extra 320,000 for Mr. EARLY compared to Mr. LATE BY 10 years!


START SAVING, INVESTING AND COMPOUNDING EARLY.