- Patience
- Emotional control
With patience, many investors don't have the patience to buy something and stay with it. They change their stocks like they change their socks. Almost everyone wants to buy that "lottery ticket" and tomorrow they are rich! Great fantasy;bad investment program!
These folks are not really investors but are speculators. In common terms, I would call them gamblers. They treat their "investments" as if they were at the horse and dog tracks where the long term returns are negative. Actually, the returns are "entertainment".
Don't let the market prices be your proxy for the value of your purchases, but look at the fundamentals of the companies. How are sales moving? What are the earnings doing? Has the dividend been steady? What is the 5 or 10 year trend in these items? Once you have done that, compare the stocks "value" to the market price. Is the market price low relative to their fundamental value? In the investment realm, boring, steady companies often do quite well.
Think of a farmer. There is no way that a seed planted today sprouts tomorrow. Stock are much the same. Stay patient!
Emotional control is also lacking with many market participants. They get excited when everyone else is excited and down when the crowd is down. This causes them to buy high and sell low.
They need to buy when everyone is down on particular stocks, industries or markets. Most equity purchases at the current level of the market are what I call "high wire acts". High wire acts are best left for the circus. There is no way I would every try the high wire between two buildings unless the wire is 2 feet from the ground.
If you have ever worked with someone who is emotionally erratic, it is a challenge. You don't want to be that person when you invest.
Like many other aspects of our lives, patience and emotional control are central to our success. Keep these characteristics in check and you will be well on your way to better returns on your investments.
Full disclosure - I like to watch the Triple Crown races for fun, not for profit!
