Core Insights - The long-term returns of a stock are closely tied to the underlying business's performance, with a business earning 6% on capital over 40 years yielding similar returns for investors, regardless of initial purchase price [1] - A business that earns 18% on capital over 20 to 30 years can provide substantial returns even if purchased at a high price [1] - The impact of taxes on investment returns is significant, with a one-time tax at the end of a long holding period resulting in a higher effective return compared to annual taxation [1] Tax Implications - Compounding at 15% per annum with a 35% tax at the end results in an effective return of 13.3% per annum [1] - Annual taxation at 35% on the 15% return reduces the effective return to 9.75% per year compounded [1] - The difference of 3.5% in returns over long holding periods can lead to substantial wealth accumulation [1]