Sell the eggs, not the goose

  • Let the power of compounding work for you.
  • All investments yield 25%/year
  • Case I: Comstock Investors
    • Invest for 12 years and then sell: 8x return

  • Case II: Typical private
    • Invest for 5 years; sell
    • Hold in cash for 2 years
    • Invest for 5 years; sell
    • 4.3x return

  • Conclusion: The return from Buy & Hold is 1.85x the return of the 5 year Buy and Sell.

Reinvestment Risk

  • May not be able to find a business that's as good
  • Don't know the new business as well as you knew the old
    • Takes time to get to know the people
    • Takes time to get to know the business
    • Risks and problems may surface that were not initially apparent
  • Selling early reduces the amount of invested capital
    • Pay capital gains taxes
    • Pay the incentive fee to the manager
  • Capital earns minimal returns while held in cash when seeking new investment