For investors as a whole, returns decrease as motion increases. The motion means the intermediaries win more as they take fees, taxes, and deduct costs from shareholders’ value.
- Related Note(s):
- This is the mathematical proof of minimizing costs and trading. More trading = more motion = fewer returns.
- Capitalism creates wealth, but motion transfers that wealth from investors to intermediaries without creating new value.
- Long-term thinking means minimizing motion. Patience is profitable; activity is expensive.
- Just like compound interest works positively, motion compounds negatively through repeated fees and taxes.
- Source(s): The Little Book of Common Sense Investing by John C. Bogle, p. 5
