No wonder Munger says, “The first rule of compounding: Never interrupt it unnecessarily.”14 The way to wealth is to buy right and hold on. By doing so, an investor minimizes paperwork, transaction costs, and capital gains taxes. To reap genuine riches, one needs to invest in long-term winners and hold on for compounded, tax-free growth. No more effective tax haven exists than unrealized appreciation in a long-lived, soundly growing company. Compounding, combined with patience, is an incredible force over time.
