Your portfolio isn’t a century-old magical compounding machine
The lived experience of real-world investors is a gauntlet of taxes, fees and the need to spend money
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A LOOK at the long-term chart of the US stock market may make you wish you were born centuries ago, especially since a dollar invested in 1871 would have grown to half a million dollars today.
If the “magic of compounding” works as touted, why isn’t Orchard Road cluttered with the descendants of Raffles-era investors who forgot they owned a few shares?
The answer is simple: the returns in financial textbooks are largely mathematical fantasies. A recent report from the CFA Institute Research Foundation titled Stocks for the Long Run Revisited describes these mythical gains as “the return nobody got”.
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