PATIENCE IN INVESTING
This is a very important topic indeed. Impatience might well be the number one enemy for any investor and patience is possibly the greatest virtue, or ally, an investor can have. Warren Buffett once said that “lethargy, bordering on sloth, should remain the cornerstone of an investment style.” So why is this the case?
Let’s take a look at the current market environment. We are certainly experiencing a bull market at the moment and hence, we find ourselves in an environment in which undervalued stocks can be hard to find. Sure, we are event-driven investors and so can still take advantage of takeovers etc (and there are plenty of those to go around at the moment thankfully), but finding stocks that are trading cheap with exciting prospects is difficult. If it were easy, you would see us recommending several new stocks a week.
And yet, in times like this, many investors find themselves investing simply to combat boredom, or to make themselves feel busy and useful. However, this is clearly a compromise of one’s investment principles. We are not suggesting that it’s an intentional compromise of one’s investment principles, but rather that boredom leads to impatience, which leads to mistakes.
Warren Buffett also once said that “investing is like batting in baseball except that you get as many pitches as you want and you never have to swing. Wait for the ‘home run ball’ before investing.” What a fantastic analogy! And so true! There is nothing wrong with being lethargic and patiently waiting for the right time to pounce. But don’t misunderstand Warren’s advice to be lethargic… this doesn’t mean you should be doing nothing. On the contrary, be vigilant in your search for undervalued stocks. That is precisely what we spend all our time doing. And when the time comes to swing, swing away in the knowledge that this is the right ball to swing at.
One obvious question that is asked by investors is “what should I spend my time doing?” The answer is researching your investment strategy. For example, if you are a value investor, then you would probably spend your time learning more about companies and the macro influences on those businesses… there is no end to the reading one can do in this business. If you are a technician, then you spend your time watching price action and looking for the patterns that represent opportunities for you. If you are a small cap investor, then you spend most of your time visiting companies and learning more about them. What we should all be doing with our time is maximising our “dollar productivity”, whatever is the most potent use of our time is what we should be doing the most of. Time equals money, so use it wisely.
Far and away the most famous and successful stock market investor of all time.