The Patient InvestorJake Steele
The human brain is not equipped to be patient and stay disciplined when the market is in a tail spin. We are conditioned through millions of years of evolution to avoid pain and seek pleasure. This is why so many investors make the mistake of selling at the very worst times when the market is down. It’s moments like this that you see some of the best opportunities in the market.
How do you counteract making investment errors at the worst times?
“The stock market is a device for transferring money from the impatient to the patient.” —Warren Buffet
Have a plan and understand how markets reward investors. Fear, greed, and all sorts of human emotions contribute to investors making investment errors at the absolute worst times. Missing the top ten days in the market over the last 20 years would cut your returns in half. By not participating in just ten days of market returns you would make half as much money!
Absolutely nobody can tell you with consistency when the market will go up or down. The only way to capture those market returns is to be well diversified and stay invested through the ups and downs. It’s not sexy and is quite frankly boring. It also goes against every human instinct to avoid pain. As Buffet says, the stock market rewards the patient. If you use discipline, stay patient and stick to your plan the market will reward you.