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The Power of Positive Asymmetry in Compounding
Understanding the power of positive asymmetry in compounding can change your perspective on investing forever. Compounding increases at an increasing rate on the upside, but decreases at a decreasing rate on the downside. Even if you make zero returns in a year, compounding can still lead to significant gains over time. The real power of compounding lies in its ability to enable you to be wrong 50% of the time and still make handsome returns, with no limit to the upside and a capped downside at zero.