(Image: Zen Buddha Silence by Marilyn Barbone.)
January 23, 2022
Here is our performance for 2021 and since inception (June 9, 2020):
|Boole Microcap Fund||Russell Microcap Index||S&P 500 Index|
|2021 net return||45.9%||18.3%||28.8%|
|2020 net return from inception (06/09/21)||21.1%||31.7%||16.3%|
|Compounded annual return (net)||32.9%||24.8%||22.4%|
|Overall gain (net)||76.7%||55.8%||49.8%|
Albert Einstein is reputed to have said:
Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.
If you invest today and stay invested, there are two factors that determine how much that investment will be worth in the future:
- The length of time over which you invest.
- The average annual rate of return on your investment.
The earlier you start investing, the more time you have to let the magic of compounding work for you.
Also, the higher the average annual rate of return you can get on your investment, the greater the sum you will have later.
WHAT IS COMPOUND INTEREST?
If you earn interest on an investment and then reinvest that interest; and if you then earn interest on the new balance (the original principal plus the reinvested interest); and if you then reinvest that interest, etc., that is compound interest.
For example, say you invest $1,000 and say you can earn 4% a year consistently for thirty years.
First, let’s say that you DO NOT reinvest interest.
- That means each year you will get $40 in interest on your principal of $1,000.
- At the end of thirty years, you will have gotten $40 in interest thirty times for a total of $1,200 in interest.
- Your principal plus interest after thirty years will be $2,200.
Now, let’s say you DO reinvest interest.
- At the end of the first year, you’ll get $40 in interest. Your principal plus interest will be $1,040.
- Since you reinvest the $40, then in the second year, instead of getting 4% interest on $1,000, you’ll get 4% interest on $1,040. So instead of getting another $40 in interest (4% of $1,000), you’ll get $41.60 in interest (4% of $1,040).
- At the end of the second year, instead of $1,080 ($1,o00 in principal plus $80 in interest), you’ll have $1,081.60 ($1,o00 in principal plus $81.60 in interest).
- Since you reinvest the new $41.60, then in the third year, instead of getting $40 in interest (4% of $1,000), you’ll get $43.30 in interest (4% of $1,081.60).
- At the end of the third year, instead of $1,120 ($1,000 in principal plus $120 in interest), you’ll have $1,124.90 ($1,000 in principal plus $124.90 in interest).
- So it continues.
- After thirty years of reinvesting the interest, instead of $1,200 in interest, you’ll have $2,243.40 in interest. So instead of a total of $2,200 ($1,000 in principal plus $1,200 in interest), you’ll have $3,243.40 ($1,000 in principal plus $2,243.40 in interest).
THE LENGTH OF TIME OVER WHICH YOU INVEST
The earlier you start investing—that is, the longer the period of time over which you invest—the greater the sum you will end up with.
Consider this example:
- If you invest $50,000 at 10% a year for twenty years, you will end up with about $336,000.
- If you invest $50,000 at 10% a year for thirty years, you will end up with about $872,000.
THE AVERAGE ANNUAL RATE OF RETURN
The higher the average annual rate of return you get, the greater the sum you will end up with.
Consider this example:
- If you invest $50,000 at 10% a year for thirty years, we already saw that you will end up with about $872,000.
- If you invest $50,000 at 20% a year for thirty years, you will end up with about $11,869,000.
$11.87 million vs. $872,000: This is a stunning difference.
WHERE CAN YOU GET 20% A YEAR?
If you invest in an S&P 500 index fund, then over the very long term, you can get approximately 9-10% a year. That is solid.
If you invest systematically in undervalued microcap stocks with improving fundamentals, then you can get approximately 18-20% a year. This is much better, especially if you invest over a long period of time. See: http://boolefund.com/how-to-get-rich/
Please contact me if you would like to learn more.
- My email: firstname.lastname@example.org.
- My cell: 206.518.2519
BOOLE MICROCAP FUND
An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time. See the historical chart here: http://boolefund.com/best-performers-microcap-stocks/
This outperformance increases significantly by focusing on cheap micro caps. Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals. We rank microcap stocks based on these and similar criteria.
There are roughly 10-20 positions in the portfolio. The size of each position is determined by its rank. Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost). Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.
The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods. We also aim to outpace the Russell Microcap Index by at least 2% per year (net). The Boole Fund has low fees.
If you are interested in finding out more, please e-mail me or leave a comment.
My e-mail: email@example.com
Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.