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When discussing investment moves with other investors I often am reminded of the following quote from Warren Buffet:
“The Stock Market is designed to transfer money from the Active to the Patient.” The best returns come from those who wait for the best opportunity to show it self before making a commitment. Those that chase the current hot stock are destined to loose more than they gain. Remain active in your analysis looking for quality companies at discounted prices, but be patient waiting for them to reach their discounted price before buying.
The way I read this is that it is often better as an investor to do nothing than it is to make an active move in your portfolio. Of course, that does not mean you never buy a dividend stock or an index fund. It means that as an investor it is your responsibility to find those opportunities that will be worthwhile and most importantly:
If I look back on the investment moves I have made in the past, the best results have come when I showed patience and did not act on instinct or that feeling that I must do something immediately or the opportunity would be lost. For example, years ago I bought a forestry stock on the recommendation of some radio non-personality! I remember the feeling I had when when I was listening to him. My heart was racing and I “knew” I had to log into my discount brokerage and enter an order for this. I “new” that my 200 shares was my ticket. How could it be wrong – I heard it on the radio!
Of course, if you read my prior post on it you will see how it worked out. This is an example of an active investor passing on dollars to a patient investor. My quick and active trading and most importantly unresearched move was not the best opportunity available and I subsequently lost money. That was a good lesson to learn.
Am I no longer impatient. No way. I am constantly fighting the urge to act quickly. Impatience is a hardwired trait that is built into me. There is a long line of family members who hold this impatience trait (my son and daughter included!). However, when I am looking at potential investments I remember this example from my past and the quote from Warren Buffet and I now can control those urges. You should find an example yourself that you can draw from to stop yourself from acting too quickly. An always remember what Warren Buffet says, “…The Stock Market is designed to transfer money from the Active to the Patient.”
Hi,
I am not sure how I should express my opinion, but, I will ask the question anyway. Is it reasonable to come to a conclusion or generalize the whole, based on a single experience of yours(my assumption) of being “impatient” and investing in a stock & the attribute of “impatience” has resulted in a loss.
Would you have interpreted the same situation if you had profited from the same transaction as “impatient” or as a “right investment at the right time”?
I hope you do understand that I am only making an attempt to understand your thought process and NOT criticizing you in any form or fashion.
Cheers
Cleric
Well sometimes you can make quick buck when you buy low and sell high immediately instead of waiting too long.
Sam
Fix My Personal Finance
http://fixmypersonalfinance.com/
The concept you write about is very true.
I often think about it this way, I am getting paid (dividends) and will be paid (cap. gains) simply for being willing to patiently wait while my money sits at the whims of the hyperactive stock market.
I agree completely, in fact I have never seen any investor, no matter how big they are make money in trading. Inevitably one crash wipes out all their profits. I think the main reason for that is that while they are tempted to book even a 5% rise and make profit. They are never able to sell at 5% below their price and wait till it goes a good 50% lower and wipes out all their profits.
Buffet has been a great influence and it has always been a pleasure to read his letters and thoughts.
http://www.onemint.com/2008/05/19/warren-buffet-and-the-fable-of-aesop
http://www.onemint.com/2008/07/09/warren-buffet-on-market-fluctuations/
Have been meaning to thank you for this post for a while. For me this was good timing. I had been chasing a stock, GEF, which refused to come into a reasonable buy range.
After reading this post, I instead used the funds to add shares to some of my existing holdings, good stocks that were beaten down to below-market prices.