Compound interest and Warren Buffett

 Warren Buffett's wealth has grown from $20K when he was 21 years old to over $100B today at the age of 90.[1] His wealth wasn't made from a single trade that turned him into a billionaire, but by growing steadily through compounding over 70 years. Anyone who wants to become as wealthy as Buffett can compare their net worth to his at some time in his life. By investing in stocks, they can grow their wealth similarly, but will require buying stocks with significant returns over years. Buffett's fortune wasn't created by some miracle that only happened to him, he just successfully picked stocks and held them over a long time period. He didn't retire at 60 and quit investing. His investments continued to compound for another 30 years after that date. Interestingly, he has publicly broadcast his investing philosophy at yearly shareholder meetings and through several biographies. In 2019, Charlie Munger mentioned Warren Buffett has also continued learning through out his life to continue this streak.[2]

1. https://www.marketwatch.com/story/from-6000-to-67-billion-warren-buffetts-wealth-through-the-ages-2015-08-17

2. https://youtu.be/YS7j0YrlceE

Margin of Safety for Growth

 With a growing company and rising stock price, it can be difficult to not want to jump in based on momentum and FOMO. However a margin of safety is important to establishing a stock position that won’t lose money. It is a common point emphasized by value investors like Warren Buffett, but less common for growth investors. Fortunately, growth stocks often have considerable volatility in addition to high returns, so it is advantageous to wait and buy these stocks when they fluctuate lower. If you expect the volatility it becomes a buying opportunity instead of a harbinger of a stock drop.

An additional mechanism I have for preventing establishing a large position all at once is to consider multiple stocks with slowly building a position and buy into the one that has the highest expected return plus the highest percentage difference from its 52 week high. The return for the past year can serve as an estimate of expected returns.