The Power Of Componding

 Compounding is powerful, but only for those who give it time. Many investors understand this in theory, yet miss out in practice by selling too early. A simple example makes this clear. Imagine two investors, Amit and Rahul. Both invest ₹1 lakh in the same quality stock growing at 15% annually. Amit stays invested for 20 years. Rahul, however, sells after 10 years, feeling satisfied with the gains.

After 10 years, both Amit and Rahul have about ₹4 lakhs. Rahul exits and moves the money elsewhere. Amit does nothing — he simply stays invested. Over the next 10 years, something remarkable happens. Amit’s ₹4 lakhs continues to compound at 15%, growing to nearly ₹16 lakhs by year 20.

Rahul made a “profit,” but Amit built wealth. Rahul earned ₹3 lakhs in gains. Amit earned ₹15 lakhs — five times more — without making any extra investment. This is the hidden cost of selling early. The biggest returns don’t come in the first few years — they come later, when compounding accelerates.

Markets will always test patience. But investors who resist the urge to sell good businesses early allow time to do the heavy lifting.

Compounding doesn’t reward activity. It rewards patience.

When to Sell and When to Stay Invested

 One of the toughest questions for any investor isn’t when to buy - it’s when to sell. Selling too early can cut short compounding. Holding too long can turn paper profits into regrets. The key is knowing why you’re selling. Here are a few guiding principles.

When to Sell

1. The Fundamentals Have Changed
   If the company’s core story weakens - slowing revenue, rising debt, poor management, or a loss of competitive edge - it’s time to re-evaluate.

2. The Stock Is Overvalued
   When prices run far ahead of earnings or book value, it may be wise to book partial profits and redeploy into better opportunities.

3. You’ve Reached Your Goal
   If the investment has achieved your target value or fulfilled the goal it was meant for (say, your child’s education fund), don’t hesitate to book profits and move to safety.

When to Stay Invested

Stay invested when the business remains strong and your goals are still far away. Short-term volatility is normal - long-term compounding is where real wealth is built.

As Peter Lynch famously said, “Far more money has been lost by investors preparing for corrections than in the corrections themselves.”

The best investors aren’t constantly selling. They hold quality businesses patiently — and act only when fundamentals or personal goals demand it.