Someone please explain it to me like I'm 5, from my understanding there is no compounding from investing in stock long term since unless you sell and add your profit back into the stock when the price point return to your original entry point, your gains are just unrealized gain and unrealized gain does not compound, they just grow/shrink.
We've always heard Buffet fortune is because he benefits greatly from the rule of compounding and investing early when he was young. Is that because he sell and buy very frequently to realize the gains and putting them back in the market to compound that gains? If that is the case if you only buy and hold long term until you retired, there would be no compounding at play or am I wrong?