Last Updated on December 2, 2024
Overview
The following discussion serves as a sort of follow-up to a previous article where I talk about the importance of patience when it comes to investing.
In that article, I discussed at length the importance of learning when to simply wait, and understanding that learning how to be patient is part of every investor’s success.
While patience is an indispensable trait that I believe every investor should have, patience will do you no good if there is not enough time available for you to work with.
When it comes to time, it can either be an investor’s greatest ally or worst enemy.
Giving Yourself as Much Time Possible
Imagine you are tasked with making a very big decision, something that will have a major impact on your life, for either good or bad depending on your choice.
Most people would want to give themselves plenty of time to properly evaluate their options and to make sure that the decision they ultimately make is as informed as possible.
In the Learning to Be a Patient Investor article, I focused on three aspects where an investor needs to exercise their patience: performing analysis, growing their portfolio, and learning something new.
I will revisit those three elements, but this time in the context of giving yourself sufficient time. Ample time and patience go hand-in-hand.
An investor can easily underestimate the importance of giving yourself enough time to work.
When it comes to investment analysis, a lot of factors go into evaluating investment merit. Thoroughly analyzing and understanding all those factors is not something you can simply do when you have time to spare.
I’ve brought this up before: nobody becomes super wealthy overnight through investing. The last time people woke up as multi-millionaires (at least on paper) was during the Dot-Com Bubble – if you’ve read some of my other articles or do a quick search about this, you know how those “millionaires” ended up.
If you are just starting to learn the ropes of investing or are simply looking to learn a new concept to add to your existing investing knowledge, most investors will need sufficient time to understand and master a concept they come across.
Again, an investor can have all the patience in the world, but it won’t matter if they have very little time to work with.
Time is Money – More Money Than Previously Imagined
I’m sure you have heard the phrase “time is money” at least once in your life.
On the surface, most people might interpret this as “don’t waste your time” or “time is valuable”, but this simple phrase has a lot more insight to it than most people may think.
Let’s say you spend five hours analyzing a company’s annual reports, quarterly reports, and other available data to evaluate whether it should be part of your portfolio.
Imagine that, after performing your analysis, you decide that the company has excellent investment merit, so you purchase $1,000 worth of shares. One year later, the market value of those shares is now $4,000, and you decide to sell.
Assuming fees and commissions are negligible, you would have made a healthy $3,000 profit.
Those five hours you spent doing your due diligence resulted in a $3,000 profit. For every hour of analysis performed, you earned $600.
On the other hand, imagine you spend only half an hour skimming through a company’s reports and financial data.
After performing this cursory analysis, you decide to purchase $1,000 worth of shares due to the fear of missing out (more on fear of missing out here).
Turns out, the company you abruptly decided to purchase was in a precarious financial situation. One year later, the market value of your shares drops to $100.
To cut your losses, you decide to sell, resulting in a $900 loss.
30 minutes of half-hearted analysis led to a $900 loss. On an hourly basis, you just lost $1,800 dollars per hour.
“Time is money” is such a sneaky yet powerful quote because it can go both ways. The time you decide to spend on an endeavour may result in a future financial gain, or the time you decide not to spend on an endeavour may result in a major loss.
This quote also implies that there is no limit to how much time can be worth in dollar terms.
Back to our previous example, five hours of analysis could have led to a $4,000 or $5,000 profit if you had decided to sell at a later date.
Of course, this concept of “time is money” is not limited to just analysis. Spending 30 hours learning how options trading works, coupled with a few hours of analysis, can lead to a $2,000 profit from a successful options trade, owing to a combination of adequate knowledge and preparation.
With this in mind, it seems ludicrous that so many people still decide to spend so little time to properly perform analysis or learn new investing concepts, then they scratch their heads in an effort to determine what went so wrong.
More Time = More Money?
Now, I’m not saying that dedicating more time to investing-related activities will immediately guarantee more money in the future.
Just like the phrase “time is money”, you’ve also probably heard of the concept of Diminishing Returns.
Put simply, Diminishing Returns is an economic law that states that past a certain point, more input (time, energy, labour) starts to produce less and less marginal output (i.e., the difference between successive outputs become less). Eventually, the marginal output becomes negative (successive output is less than before).
Giving yourself plenty of time to perform investing-related activities is important, but what an investor does during that time is just as, if not more important, than how much time they have available.
An investor can give themselves six hours to perform analysis, but it won’t matter if they only spend one hour doing productive work, and spend the other five hours staring into space.
Similarly, an investor can get lots of work done in a three hour period if they remain focused the entire time.
Dedicating a sufficient amount of time to perform investing-related activities such as analysis and study is important, yes, but spending more and more time poring over the same annual report is meaningless if very little new insight is gained.
Adding more time is meaningless if an investor starts to lose their focus and begins to let their mind wander.
Some Ways to Create Time for Investing
It’s easy to say, “dedicate more time for investing”, but that’s much easier said than done.
All of us have the same 24 hours available every day, and what we do during that time is completely up to us.
Throughout the years, here are some tips/methodologies I have used to allocate sufficient time to do the activities I want:
Plan Your Week and Days of the Week
From experience, this is by far the most effective tool I’ve used to make the most of my time.
I have been doing this since Grade 12 (~6 years ago), and my productivity has been incredibly high ever since.
A lot of people underestimate the power of having a plan.
It’s true that plans won’t always work out as expected, but it’s much better to have a rough idea of what you want to do than deciding what to do on the fly.
Having a plan makes it very clear as to what activities you intend to perform in the coming week, which days to work on those tasks, and which days they should be completed by.
Deciding what to do on a given day, every day, is mentally draining and wastes a lot of your time. Knowing what you want to do beforehand can help you avoid that unnecessary daily stress.
I create my plan for the coming week every Sunday evening, then create my plan for the next day in the evening (i.e., I make my plan for Tuesday on Monday night).
Prioritize Your Tasks
Once you have a weekly plan and daily plans, you need to assign a level of importance to each task.
Not every task is made equal. All the tasks you plan to complete during the week are likely important, but not every task is equally as important.
The tasks that I have marked in a given week as “high priority” are normally the top two tasks I need to have finished before anything else.
High priority usually means something very complex and intricate, so naturally, they are allotted more time than lower priority activities.
Wrapping Up
Learning to be patient is a hallmark trait every investor should possess, but patience alone is not enough.
Having lots of patience while also having lots of time to work on investing-related activities is a very powerful combo.
An investor with sufficient time and patience can perform very high-quality analysis, master virtually any investing concept they encounter, all while watching their portfolio grow through the years.
While having plenty of time is important, an investor must ensure they make the most of every minute they have. Allocating six hours to perform investment analysis is meaningless if only an hour’s worth of productive work is performed.
Adequate planning and prioritization of tasks can help identify when important tasks, such as investment analysis and/or study, can be performed during the week, without having to expend a lot of mental power stressing over what to do every day.
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