We have always wondered why certain people are capable of turning small and limited amount of resources available to them, to a significantly enlarged pool of resources. A good observation during winter, where people would build snowball, will give us a glimpse into how they achieve it.
Though the process of making a physical snowball would occur naturally to us, yet not many of us are able to apply the “snowball making process” to our work, especially in the subject of investment. The pathway for an investor can be described as rolling snowball up a hill and eventually allow the snowball to roll itself down the hill. One would have to spend increasingly more energy and time to roll the snowball up the hill, before being able to enjoy the fun of seeing the snowball building up itself while rolling down the hill. Investors have to spend a large amount of time to accummulate an immense amount of investment knowledge before they are able to generate net income steadily.
Let’s take a look into Warren Buffett’s investment in Coca-Cola. After performing his due deligence (accumulation of knowledge), he took advantage of stock crash in 1987 to invest heavily in Coca-Cola. The result? Growth of 16 times over the ensuing 27 years for that investment (including dividend), and still growing until today. Have a look at Berkshire Hathaway. Should one does his/her due deligence and invested back in 1990, one would get 3,500% (35 times) return today, after 27 years.
Snowball effect rewards persistent and patient investors. It is a subtle, yet immensely powerful effect that gives rise to wealthy investors.
