Most investors chase the next big winner. The wiser ones ask a different question: which companies could quietly destroy their wealth?

Compounding is one of the most powerful forces in wealth creation. Growing capital at 15% per annum multiplies it fourfold over a decade, while 20% per annum multiplies it sixfold. Patience truly pays a premium — provided your capital survives long enough to compound.

Yet even the most patient investor will struggle to achieve these results if their portfolio contains a handful of Capital Killers — businesses with structural, managerial or behavioural risks that can permanently damage wealth. 

As Howard Coleman noted, premium compounding “won’t multiply your wealth by 4–6 times in 10 years if your portfolio contains several lurking Capital Killers.”

This is where disciplined filtering, rational behaviour, and understanding risk — real risk — become essential.

The mathematics of avoiding mistakes

Decades of Teaminvest research show a striking pattern:

Companies that pass our Conscious Investor filters are 5.5 times more likely to still be passing in five years than companies that do not pass today. These companies are our “Wealth Winners”.

However, the moment a company fails the filters, its chance of being a Wealth Winner collapses by more than 80%. At that point, the rational action is simple: sell it and deploy capital to opportunities with statistically superior odds.

This is not theory — it is probability applied to capital preservation.

The research also shows that 85% of passing companies should meet Teaminvest’s minimum return expectations, and around 15% will disappoint over any five-year period.

These are extraordinary odds for long-term wealth building, but only if we don’t compound our disappointments by holding companies after they fail.

Why Capital Killers™ matter more than Unicorns

Much of the broader investing world obsesses over finding the next “unicorn”. Yet as Charlie Munger repeatedly advised, the wiser approach is to invert:

First, eliminate what can kill you.

You do not need 100-baggers to build extraordinary wealth over decades. You need a portfolio that avoids permanent loss and compounds reliably — quietly, consistently, minimising drama.

Constantly chasing a single big winner cannot offset the drag of several Capital Killers, particularly if your losses are timed poorly, reducing your capital base.

However, a portfolio of disciplined passes, backed by a rational process and protected by selling failures early, allows compounding to work its quiet magic.

Endowment Bias: a destroyer of compounding

Endowment Bias frequently blinds investors to deteriorating business quality. A company may have rewarded us handsomely in the past, creating a halo effect that causes us to justify poor performance, weak management decisions or deteriorating financials.

Teaminvest history is full of examples: companies that once passed the filters, later failed, yet some members held on due to emotional attachment. As Howard Coleman summarised, nearly every case of severe member disappointment stemmed from failing to act after a company failed the filters.

Corporate Travel Management (ASX: CTD) is a timely reminder. The company has not passed the filters for more than five years, yet the rising share price tempted some to keep holding. The ongoing accounting failures, overcharging investigations, and suspension from quotation highlight a simple truth: share prices can tell a different story from the underlying business.

Why focusing on the wrong risks creates Capital Killers

Human psychology primes us to focus on the wrong risks. Behavioural research tells us that people stress about likely risks with low damage while routinely ignoring low-likelihood risks with high damage — precisely the type that turn Wealth Winners® into Capital Killers.

Our members and co-founders (shared wisdom) have illustrated that the most damaging risks often stem from:

• management doing something foolish with capital,
  
• poor or misaligned remuneration,
  
• dishonesty or untrustworthy behaviour,
  
• structural fragility (e.g., excessive fixed costs and low Break-Even Safety Margins),
  
• or major shifts in industry or technology.
  

These are the risks that permanently erode capital, not day-to-day volatility.

Our Conscious Investor filters are explicitly designed to eliminate companies with these characteristics before they reach members’ portfolios.

Minimising Capital Killer risk ultimately comes down to people. Great management compounds value; mediocre management destroys it quickly. This is why Teaminvest places such emphasis on management track record, integrity, and alignment with owners.

Patience amplifies the returns of great businesses. Procrastination magnifies the damage of mediocre ones.

The internal scorecard that builds lasting wealth

Teaminvest’s philosophy centres on process, not prediction. Members focus on the enduring principles of business ownership: financial strength, trustworthy management, sensible valuation, and the discipline to act when evidence changes.

Avoid Capital Killers.

Identify Wealth Winners.

Invest only with an appropriate margin of safety.

Do those three things well, repeatedly, and your capital has the best chance of surviving — and compounding — for decades to come.