Overview
In today’s world, it seems like there is never enough time to do everything we wish to do. Society has always pushed the envelope of how to do things faster. Whether it’s getting around the globe or buying things we want, innovation in these activities has always been measured by how quickly and effortlessly we can perform them.
Yet, despite humanity’s relentless push to do things smarter, faster, and better, there are some endeavours that, no matter how optimized the process or fast the work, simply take time. A tree still takes decades to fully grow, no matter how frequently it is watered or given fertilizer. There are times when being patient is our best, and only, option.
Investing is one of those endeavours that can only be optimized up to a point before an investor is forced to simply be patient.
I’ve repeatedly brought up that an investor’s worst enemy is their own emotions. No amount of brainpower can save an investor if they succumb to their emotions.
So many people falsely believe that the best way to solve our problems is to take massive action as quickly as possible. It doesn’t matter what those actions are, as long you do something then surely your problems will be solved.
I can confidently say that this view is completely erroneous. There will be times when the best course of action is to take less action and simply wait. I’ve experienced this several times throughout my investing career.
In the following sections, I will go over situations that I have personally experienced where my only option was to take a deep breath and take a step back. I hope you can avoid making the same mistakes I have made.
Rushing to Perform Analysis
We know from the definition of investing that an investment should be made only after it has been thoroughly analyzed and understood.
On paper, this sounds very logical and should be easy to follow. In practice, performing thorough analysis is a lot easier said than done.
Sacrificing the quality of your analysis because of impatience will cost you, literally. I know that feeling first-hand.
One of my biggest investment mistakes was hastily purchasing shares of Maple Leaf Foods. At the time, I was looking to diversify my portfolio, and I believed that the food industry would provide the diversity I was seeking. I came across Maple Leaf Foods, skimmed through a couple of annual reports, then decided to purchase.
My desire to purchase what I mistakenly believed was a good company overrode my logical thinking of thoroughly understanding what I was about to buy. I chose to forego analysis because I was impatient.
This was one of the instances where I succumbed to my emotions, and as a result, I ended up making a very bad decision. I held Maple Leaf Foods for less than a year before I ended up selling. To add insult to injury, I sold my shares at a loss.
A lot of variables ultimately affect an investment decision, so it would make sense for a thorough analysis of all those variables to take time.
Thorough investment analysis is one of those activities that, no matter how much you optimize the process, cannot be rushed.
Sure, you can use Excel to accelerate your quantitative analysis, or only read certain portions of a company’s annual report, but assuming each of these activities are meticulously performed then one day of analytical work may not be enough time.
When it comes to performing analysis, the worst thing an investor can do is to rush their work. This is because any red flags or other weaknesses not detected during the analysis will eventually show up. Investors will always pay for their negligence; if not now, then later.
An investor needs to learn to be patient when it comes to performing investment analysis. It takes a lot of time to reach a decision, but getting it right the first time means reducing the likelihood of dealing with mistakes down the road.
Trying to Learn Something New
Part of every investor’s journey is the endless pursuit of new knowledge. The investing world is very dynamic: new theories, strategies, and philosophies are always being presented. I’ve previously talked about the importance of continuous learning in a previous article.
With so much new information for investors to constantly absorb, it is only natural for some topics not to make sense right away.
When I first started to learn about investing, one of the very first books I read was Benjamin Graham’s The Intelligent Investor.
I still firmly believe that The Intelligent Investor is one of the greatest investment texts to have ever been written, but in retrospect it is definitely not a book for new investors. I didn’t know much about investing before reading the book, but after finishing it I ended up having even more questions.
And so, I began my investment education. Little by little I pieced together key investment theories and concepts, with new questions arising as I went.
Naturally, not every concept made sense to me at first. It’s so tempting to look at a difficult concept then tell yourself “I’ll learn about this later”.
It’s fine if there are things you do not understand right away. I’ve had the privilege of meeting and working with lots of very smart people throughout my life, and even they occasionally found themselves stumped by certain theories or concepts.
However, problems start to arise when you refuse to go back and understand the theory or concept you previously did not grasp simply because you “don’t have the time” to learn about it.
In my experience, you never know when your investment knowledge will be used. Failure to understand a certain topic today may lead to a bad investment decision down the line because of inadequate knowledge.
At the time of this writing, I currently do not trade options (for a quick intro on options, click here). Although I do not work with options right now, that is not to say I will never work with them. This slight possibility of one day actively trading options leads me to continuously learn more about them, in case an excellent investment opportunity involving options arises.
Everyone learns differently, and there will be instances where you may scratch your head in frustration because a concept just won’t click.
Understand that taking a while to learn something that may be of use to you is better than not learning it at all.
It’s fine to go back to difficult concepts and take your time to learn them. The worst thing an investor can do is to assume that a certain topic will not be of use to them, only to find out that an investment decision requires an investor to have knowledge in the concept they chose to skip over.
Superior Returns Don’t Happen Overnight
Remember, investing is not, and will never be, a get-rich-quick scheme.
Not only that, but considerable wealth is not guaranteed from investing either. Even if an investor achieves a seven, eight, or even nine-figure portfolio, chances are that did not happen overnight.
Despite these truths, many investors grow impatient, hoping that their portfolio will experience meteoric growth in a very short period of time, regardless of all the empirical and quantitative evidence that suggests otherwise.
There are investors that make a lot of money very quickly, yes, but those outsized returns are almost always temporary.
No portfolio will double, or triple, or quadruple in value, forever. If that were the case, then there should already be trillionaires. Every portfolio takes time to grow.
Refusing to accept this truth can easily lead an investor down a very dangerous path. A path where they stop being investors and turn into speculators instead.
There was a time where I used to check my portfolio every day. Not only did I do that, but I used to check my portfolio several times in one day. I was so obsessed with seeing my portfolio increase in value.
Earlier, I mentioned that one of my greatest investment mistakes was hastily purchasing shares of Maple Leaf Foods. Part of that mistake was my impatience, but the other part was my speculative desire to make a quick profit.
Like many other investors, I mistakenly assumed that just because the price was down right now, it would rebound to its previous price eventually. Boy was I wrong.
A portfolio takes a lot of time, energy, and effort to grow, and even more time, energy, and effort to maintain. When it comes to investing, there is no such thing as a sustainable way to make quick money.
Don’t Be Too Hard on Yourself
There will be times throughout your investing career when things don’t always work out in your favour: perhaps markets are down for long periods of time, maybe markets are too high presenting few purchase opportunities, or maybe you made a very bad investment decision.
My investing career has had its fair share of ups and downs, and I know for a fact there are many more highs and lows I will encounter.
An investor faces many potential roadblocks, but the biggest obstacle they will always face is none other than themselves.
It’s so easy to beat ourselves up over past mistakes, and by doing so discourage ourselves from continuing.
There will be times when an investor will want to quit, not because of external pressure, but because they talk themselves out of it, believing that their inadequacies cannot be changed.
Early in my investment career, my knowledge was limited, analysis felt like an eternity, and my portfolio seemed to have stagnated. Like many other investors, I seriously contemplated withdrawing from the investing world entirely.
This is where the importance of patience comes in. Through the years, I learned that allowing yourself to make mistakes and to stumble every now and then is important to an investor’s growth.
Nobody starts off as an expert. Even the world’s most prominent figures in business, finance, politics, and sports had to start somewhere.
There is nothing to be gained by being overly critical of oneself. Being impatient with yourself usually just leads to doubt, frustration, and irrational decision making.
Learning to stop, take a deep breath, and collect your thoughts can do wonders for an investor’s conscience.
Wrapping Up
No doubt, there will be instances throughout your investing career where your patience will be tested.
I know my patience has been put to the test on several occasions, and there have been a few instances where I lost my cool and my emotions got the best of me.
This cannot be stressed enough: an investor’s worst enemy is their own emotions.
An investor needs to learn how to make quick decisions when they need to, yes, but it is also important to know when to take a step back and to sit still.
Investing is a fine balance between knowing when to take quick, decisive action, and knowing when to slow down. Investing is not an activity where the person who moves the fastest automatically wins.
You know what they say: “Patience is a virtue.”
