Charlie Munger Once Said, 'The First Rule Of Compounding Is To Never Interrupt It Unnecessarily' — Now His Wisdom Rings True As The S&P 500 Surges 220% Over 10 Years

The S&P 500 index has yielded a 220% return in the last 10 years. Peter Mallouk, the CEO of Creative Planning Inc., highlights this data and recalls veteran investor Charlie Munger‘s insights on the power of compounding and being patient through uncertainty.

What Happened: According to the graphic shared by Mallouk, the S&P 500 Total Return index has risen by 220% since 2015, providing a 12.3% annualized return over these 10 years.

However, the graph also shows another scenario where the investors who exited their positions on March 23, 2020, due to the fear of the COVID-19 pandemic, earned only a 17% return, representing an annualized return of only 1.6% over these same 10 years.

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Recalling the insight from the former Vice President of Berkshire Hathaway Inc. BRK BRK, Charles T. Munger, Mallouk post stated, “The first rule of compounding is to never interrupt it unnecessarily.”

Thus, Mallouk implied through Munger’s saying that the power of compounding would yield positive results if the process of compounding is uninterrupted. The shared data reiterated this through the pandemic’s panic example.

Additionally, Mallouk shared another set of data representing the growth of a $100,000 investment made in the S&P 500 Total Return index 50 years ago in 1974.

According to the inflation-adjusted growth of this $100,000 investment, the amount in 2024 would stand at a staggering $15,347,191.

Highlighting this, Mallouk quoted Munger again, "The big money is not in the buying and selling but in the waiting."

This again reiterated Munger’s teachings, stating that patience was the key to the power of compounding, as “waiting” was more important than “buying or selling.”

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Why It Matters: After the tariff-induced sell-off began in the market, the S&P 500 index has turned positive for the year with a 1.53% year-to-date return. The Dow Jones Industrial Average was up 0.62% and the Nasdaq 100 advanced 2.16% in the same period.

Despite falling into the bear market territory, the markets have shown resilience as the President Donald Trump-led administration has successfully managed to strike a deal with the U.K. and a 90-day truce with China.

Ryan Detrick from Carson Research highlighted in an X post that the “bear market isn’t fully recovered yet, but it is close.”

According to the data shared by him, the bear markets between November 1980 to August 1982 and March 2000 to October 2002 staged the quickest recoveries, within three months.

“Should it happen soon, this will be the quickest recovery ever from a bear or near bear market.”

Thus, Munger’s message of showing patience and waiting for compounding to work is representative of this market recovery.

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