Heptagon European Focus Equity Fund Mantra
The Magic of Compounding! Divulging into European Focus Fund’s mantra on day 5!
Once a good business in a good industry has been identified – stick with it: European Focus aims to live by the mantra Warren Buffett once expressed: ‘Time is the friend of the wonderful business and the enemy of the mediocre.’ In equity market terms this implies that time will normally reward the owner of a strong business. However, due to the frequent premium valuations of such a business, unfortunate timing of an investment in such a business can be an occupational hazard. Christian often goes into great length into what constitutes a good business as well as a good industry, but in simple terms they share two commonalities: their end-markets grow by volume and value over time.
Once invested in a good business, compounding is amazing: compound returns make an investment grow faster because the interest is calculated on the accumulated return over time as well as on the principal. If compounding is successful, it can create a snowball effect, as the original investments plus the income earned from the investments, grow together. Albert Einstein is supposed to have said: ‘Compound interest is the eighth wonder of the world – he who understands it earns it; he who does not pays it.’
Follow along for tomorrow’s sweet stock profile!
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