I have been caught in the compounding trap many times in the past two years. The most recent  incident occured last month with Compactsurf. While I am in profit now overall, my gains over the past two years would have been significantly higher if I had been more prudent with my compounding. It is very easy to fall into the compounding trap. We put our money into a program with the hope that in a few months or years it will make us better off. Some of us put our money into a program with a specific goal in mind (buying a car, taking a vecation, saving for your kids college fund and so on). What better way to reach our goals than to compound in our favourite program? In the case of Compactsurf, I was determined to max out my account as fast as possible. In my zeal to accomplish this goal, I ended up with a $1000 loss. Had I been less aggressive with my compounding, I would have been a few thousand in the green instead of a thousand in the hole. Why haven't I learned my lesson after 2 years? The answer to this is simple; one is always thinking that the current program is different and shouldn't be judged in the same light as the ones that got you before. Will this happen to me again? Very unlikely. I have finally learnt my lesson and will be making principal retrieval a priority going forward.

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