There is a deeply ingrained belief circulating in the investment community: cutting losses promptly is an iron law. Market professionals repeatedly emphasize the importance of stop-loss levels, risk control, and quick entry and exit. But the reality is often quite the opposite — this set of theories has caused far more accounts to fail than to succeed.

The first principle of achieving compound growth of wealth is actually simple: unless necessary, don’t touch it.

Look at those traders who stare at screens all day, their hands flying over the keyboard, thinking they are controlling risk. But in reality? Every trade is friction, and each friction erodes the power of compounding. You have to pay commissions, taxes, and suffer spread costs. But what is the most hidden cost? It’s the mental energy consumed by each decision, the emotional fluctuations accumulated, and the probability of repeatedly making mistakes — these are the real meat grinders.

For example: you plant a tree, and every three days you dig it up to check the roots, claiming it’s dynamic management. The result? The tree dies, and so do the gains.

Compounding is not a math game; it is a friend of time. But this friend has a temper — if you keep interrupting him, he won’t play with you anymore.

Spending over 50 years at Berkshire Hathaway, I’ve seen too many smart people complicate simple things. They master technical analysis, derive various indicators, read countless research reports, yet still end up losing badly. What’s the root cause? They don’t understand human nature, nor the essence of compounding.

How do people who truly make big money do it? Buffett held Coca-Cola for decades, and our investment in BYD has also been over ten years. This is not laziness, but a deep understanding of a principle: good businesses don’t need you to tinker every day; bad businesses, no matter how well you care for them, are still bad.

People who trade hundreds of times a year are not investing; they are gambling, fighting against their own nervous system. Every trade weakens judgment a little, increasing the probability of making mistakes next time. It’s a vicious cycle.

Remember: the essence of compounding is to stop messing around.