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The $1000 Hot Dog

Chris Davis shares a story from his grandfather that underscores the incredible power of compounding – essential wisdom for all investors.

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The $1000 Hot Dog

You know both my father and my grandfather were great teachers. And they often looked for teaching moments. But maybe the most important one came when I was still relatively young. I was working a summer job for my grandfather and we were coming back to the office and it was around lunchtime.

And I asked him if I could borrow a dollar to buy a hot dog from a street vendor down on Pine Street. And he stopped and he looked at me and he said "Do realize that instead of spending that dollar, you invested it and you earned the sorts of returns that I've earned over my lifetime and you lived as long as I have lived, that that dollar would be worth more than $1,000?".

And I said I hadn't realized that. And he looked at me and he said "Is a hot dog really worth $1,000?" And the power of this lesson, it sort of sweeps across how I think about investing because of course the first part of the lesson is simply the value of a dollar.

It's amazing that in my lifetime the purchasing power of a dollar is down more than 85%.

So you realize that holding cash, thinking you're safe, it's actually eroding in value, year after year after year. And that was a powerful lesson to think about.

Of course the second lesson is simply the miracle of compounding. Just the power of a dollar turning into $1,000. Like in our flagship mutual fund that $10,000 invested at the start of our fund would now be worth over $1.7 million. The power of compounding is so extraordinary.

And of course the last lesson was about carrying my own money. And of course I say this laughingly, but there is something about financial independence that is central to what we try to achieve for our clients. We recognize that the value of that financial independence can't be overstated.

The average annual total returns for Davis New York Venture Fund's Class A shares for periods ending September 30, 2015, including a maximum 4.75% sales charge, are: 1 year, -4.81%; 5 years, 9.40%; and 10 years, 4.68%. The performance presented represents past performance and is not a guarantee of future results. . Total return assumes reinvestment of dividends and capital gain distributions. Investment return and principal value will vary so that, when redeemed, an investor's shares may be worth more or less than their original cost. The total annual operating expense ratio for Class A shares as of the most recent prospectus was 0.86%. The total annual operating expense ratio may vary in future years. Returns and expenses for other classes of shares will vary. Current performance may be higher or lower than the performance quoted. For most recent month-end performance, visit or call 800-279-0279.

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