If market-timing is the nemesis of the Foolish investor, then it’s time what we have a league of super best friends on our side, namely: patience, persistence and temperament. This trio of superhero-like attitudes that is worth keeping close, as it may serve us well in our investing futures. Super Patience Patience in investing may come in many forms: patience for the right business to come along; patience for right price for those right businesses; patience for the long term success of your chosen businesses. Lest we forget, its the business behind the ticker that matters over…
If market-timing is the nemesis of the Foolish investor, then it’s time what we have a league of super best friends on our side, namely: patience, persistence and temperament. This trio of superhero-like attitudes that is worth keeping close, as it may serve us well in our investing futures.
Patience in investing may come in many forms: patience for the right business to come along; patience for right price for those right businesses; patience for the long term success of your chosen businesses.
Lest we forget, its the business behind the ticker that matters over the long term. Or as investing maestro Peter Lynch would succinctly put it:
Often, there is no correlation between the success of a company’s operations and the success of its stock over a few months or even a few years. In the long term, there is a 100 percent correlation between the success of the company and the success of its stock. This disparity is the key to making money; it pays to be patient, and to own successful companies.
In short, it is our patience with the right businesses at the right price over the long term that will help us gain a decent return over the long haul.
In one instance, shares of Kingsmen Creatives Ltd (SGX: 5MZ) has gone up by more than three fold since the start of 2004. And, it’s for good reason. From the chart below, we can observe how the corporation marketing outfit has steadily increased it free cash flow and cash balance over the past decade.
Source: S&P Capital IQ
Investing can be simple, but not easy.
From the graph below, we can see the maximum yearly declines that the Straits Times Index (SGX: ^STI) has undergone from 1993 to 2014. The graph has lead my Foolish colleague Ser Jing to conclude that there is no long term results without short term pain.
Why, you may ask?
Here’s the kicker: out of the 21 years examined in the graph below, only three years saw declines of less than 10%. The rest of the years experienced declines in the tune of 10% or more in a year.
Source: S&P Capital IQ
Despite this, iron-cald persistance in holding for long term may bring better results for the Foolish investor. The STI has returned a decent 6.8% annually (including dividends) over the same period above.
Captains of our temperament
Buffett: "[Investing] is an easy game if you can control your emotions." Oh yeah, simple… #BRK2015
— Matt Koppenheffer (@KoppTheFool) May 2, 2015
Like it or not, emotions – like greed and fear – will play a part in our investment process.
Money can represent sustenance to life for most investors. As such, losing money can is psychologically painful to endure for the common investor. Pain points like these may make us susceptible to our own emotions. The key here is to recognise our pain points and find ways to be the captain of our own emotions.
In my previous article, I have talked about a few ways that may help:
So, if it is the fear of monetary loss that worries you, then maybe keeping some cash on hand at all times can soothe that fear. If it is the fear of share prices tanking, then consider taking smaller positions. Or if it is the noise from the financial media that unsettles you, then take a stroll in a park or do some gardening.
Assembling your super best friends
It is through judicious persistence that helps us to weather the short term storms in exchange for potential long term results for our shares. And it is through patience that may allow those shares to compound over time to deliver outsized results. Most of all, we should keep our wits about us as the market inevitably gyrates over the short term. For the Foolish investor that holds his or her temperament, market volatility may become an opportunity.
With a little help from our super best friends: patience, persistance and temperament – we may then leap ahead to a better financial future.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.