Winning investment approach: “Maximize compounding”

Compounding is the most important aspect of investing but is often overlooked as to the importance for long term success.  Compounding 100K @ 1% x 20 yrs results in 122K but obtaining a 10% rate of return on the same funds would result in over 672K at year 20.  Clearly, obtaining a high rate of return would make a notable difference in the way one could retire!  Yet, the risk of drawdown must be considered in conjuction with maximizing return.  Having the 100K account drawdown (decrease) by 50% requires obtaining a return of 100% to get back to 100K.  The time to get back to breakeven is time lost that funds can not compound.  Worse yet, drawdowns can lead to poor investment choices when one tries to “make up” for losses incurred.  

Whether through the ShadowFund Opportunity Group or Shadowfund trading system, the guiding principle of our investing is to obtain a rate of return of 10% or greater annually while mitigating risk for substantial drawdown.  Shadowfund does not endorse high stakes options strategies, startups, or other highly speculative investments and recommends less than 3% equity stake for any one investment.  In summary, we utilize double digit compounding and minimize drawdowns to provide exceptional returns over the long term.

While there are many investment approaches, there is one global principle that applies to all investors:  Maximizing return while minimizing risk will result in phenomenol results through the power of compounding.

Our guiding principle is to maximize the velocity of money while minimizing drawdown.