The Investor’s Superpower – Patience

Dear Clients and Friends,

Most investors intuitively understand that patience is a key ingredient for a successful investment strategy.  Yet, so many investors fall prey to the emotional response that accompanies almost every bull market – they thrive on the activity of buying and selling to make quick profits.  With the endless stream of news, market punditry, and price changes, it is very difficult to decipher the important information from the ‘noise’. Many investors are mesmerized by the quick profits and fall prey to the belief that investing is simply about buying things that “go up”.  But, as all investors will eventually learn, volatile markets create violent downdrafts that can turn red-hot-hands into solid ice within weeks.  That is why behavior and investing are so closely related, and patience is the glue that holds together the investors constitution in times of volatility.

There are thousands of stocks and bonds that trade in our market, and a greater number of investment products.  These securities are quoted daily, and many are quoted every second of the trading day; represented by blinking lights on a computer screen.  This ‘activity’ is often understood as ‘The Market’, but for the intelligent investor the activity of the market should never influence the activity of the investor.  The job of the investor is to put this market activity into proper perspective and respond decisively when the investment odds are heavily in their favor.  Compounding works over long periods of time, but in bull markets many investors are lured into short-term thinking which ‘short-circuits’ the compounding mechanism built into our markets. The key ingredient in compounding is patience- a sense of calm amidst the hyper-active perturbations of the market.

If we look back at the Dot Com Bubble Bust in 2000, there were stocks like Qualcomm, Microsoft, Apple and Amazon that had lost the majority of their value, and these ‘busted’ tech stocks were unloved and dirt cheap.  Had you either bought and held onto those stocks in your account 15 years, the value of those securities would have increased tremendously. The same is true for real estate after the 2008 credit crises and more recently, hotel stocks during Covid. The key characteristic of these few investors is patience, they resisted temptation and held assets for decades.

As we look forward to 2022, solid economic and earnings growth is expected to help stocks deliver gains in 2022. When we consider to forecast stock market performance, we start with the economic cycle. It is believed we are currently approaching—or are already in—the middle of an economic cycle with at least a few more years left. And while we may endure some volatility, this could be a positive outlook for stocks next year. As Peter Lynch says, “More money has been lost trying to anticipate and protect from corrections than actually in them.”

Wishing you and yours the best in 2022!


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All investing involves risks including loss of principal. No strategy assures success or protects against losses.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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