Reason / Compounding / 1. of August 1291 / The Paris 2024 Olympics

Good Morning Ladies and Gentlemen

„Reason only makes sense in the context of irrationality; it’s not reasonable to always strive for rationality.“

from „unknown“ to me

Compounding in Asset Management

The compound interest effect is a powerful strategy that can inspire us to leverage small, seemingly insignificant actions to generate significant gains in asset management. This phenomenon occurs when interest earns interest, leading to exponential growth in wealth. The initial capital grows by reinvesting dividends or interest income, generating more interest and creating a growth cycle. Unlike linear growth, where growth occurs constantly, the compound interest effect results in exponential growth. The longer the money is invested and the higher the interest rate, the faster the assets grow. Visualising this effect is like watching a snowball rolling down a hill – it starts small, but with each revolution, it gains size and momentum.

1. of August 1291

The Swiss National Day is 1 August. It commemorates the founding of the Swiss Confederation, which stemmed from the Federal Charter of early August 1291. Yesterday, we celebrated this significant day with a day off, delicious food, bonfires, and fireworks. It was a celebration that we all, as Swiss citizens, could partake in and enjoy!

Compounding in Society

Okay, Ladies and Gentlemen, let’s delve into the concept of compound interest in asset management, a strategy that uses small actions to generate significant gains. What if we apply this concept to society by working towards a sensible, respectful society that leverages small actions for significant gains? Let’s consider yesterday’s Swiss national, August 1st, and apply the philosophy of the compounding effect to Swiss society. It seems like our ancestors, over more than 700 years, leveraged seemingly insignificant actions for significant gains, and today, we live in a clean and prosperous place, in a direct democracy where decency and equality prevail. It has certainly been a long journey, but looking back now, we can’t help but feel proud and appreciative of our progress. As I mentioned above, “watching a snowball roll down a hill – it starts off small, but with each turn, it gains size and momentum”.

Compounding in Society II

The question that crosses my mind is whether the effect of compounding also works for negative actions. Unfortunately, I believe it does. Political debates, where political leaders call each other names, purposefully discredit each other, lie, and seemingly are unwilling to accept consensus and/or defeat, create negative momentum, which, in the end, is bad for society. We must take 100% responsibility for everything that happens to us, focus on decision-making and continuous improvement, and, as hard as it may seem, look down the road, drift away from instant gratification, and seek exponential gains by compounding small, seemingly insignificant actions.

The Paris 2024 Olympics

So far, so good. The Paris 2024 Olympics have started with an unbelievable artistic explosion. I had never seen anything like that and was impressed by the many different levels of creativity and art incorporated into the opening ceremony in the centre of the fabulous city of Paris. Obviously, not everyone was impressed, which is fine; it is almost impossible to meet everyone’s expectations. Let’s see how this further evolves.

Next Week

Next week we will try to see what is still in the markets for the rest of the year. Let me already add that from a purely statistical point of view, August is a good month during the U.S. election year.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
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9494 Schaan/Liechtenstein
Mail: smk@incrementum.li