Practicing Patience Pays
This is an excerpt of a recent essay by Paul Goodwin of Cabot Heritage. Paul talks a bit about patience, one of the most heavily discussed topics this year, so we decided to pass it on.
-Rainy Days
It's hard to remember now, but there was a time when a rainy day presented an actual challenge to parents. The assumption was that on sunny days, children would be outside, playing in a kind of Norman Rockwell wonderland, no matter what the season.
But when the sun disappeared and the rain fell, kids were cooped up indoors, bored, grouchy and itching to let off steam in the kind of activity that often resulted in raised voices, frayed nerves and broken lamps.
There were even activity books, called "rainy day books" that prudent parents kept in reserve against their hour of need. These books featured lots of quiet activities such as coloring, cutting and pasting and helping King Arfer to find a path through the maze to his king-sized doghouse, all designed to produce quiet concentration.
For all I know, these books may still be out there, waiting to protect harried mothers from the energy and impatience of their house-bound kids.
But probably not.
Now that kids have phones, tablets, laptops, game consoles, TVs, CDs and DVDs, not to mention an entire armory of foam-tipped projectile launchers, I suspect that the challenge may be to get them out of the house even on sunny days. (I'm speaking, of course, only of the days when they're not being chauffeured to soccer, hockey, ballet, etc.)
Please note: This isn't another essay lamenting the loss of simpler childhood pleasures or decrying the potential dangers to kids who are either overscheduled or oversupplied with digital entertainment.
Frankly, I don't give a rip. I think kids generally get what they need to grow up in the world they will have to live in. I also think that most of the essays that mourn for simpler times are exercises in cheap nostalgia and age-induced youth-bashing ... not that there's anything wrong with either of those activities, either.
But my topic today is aimed at mature adults who actually handle the investment of at least part of their own capital, especially those who (invest).
Here's the question: What does an investor do on a rainy day? And by that I mean, what do investors do when the market is just too volatile or too negative to allow (investors) (especially the growth investors for whom I write) to play safely on Wall Street?
The answer isn't likely to please the Type A investors who feel the need for constant action and the overconfident investors who believe that they can prosper no matter what the broad market is doing.
The answer is "practice patience."
Patience used to be taught as one of the seven cardinal virtues, and it was a popular name for women in Puritan America (probably wishful thinking, but there it is).
But the modern attitude toward patience is aptly summarized in one of my favorite cartoons of all time from Gary Larson's "Far Side." The picture shows two vultures sitting on a branch. One says to the other, "Patience hell! I'm going to go kill something."
I know that for some people, trying to be patient is like a teapot over a hot burner trying not to boil. Some people believe very deeply that their lack of patience is a virtue, although I doubt that they seek corroboration of this impression from their friends and co-workers.
These tendencies are deeply rooted in people, and there's not much use in my advising impatient people to get a grip on themselves.
But I wish I could, at least as far as investing is concerned.
One of the biggest lessons of Cabot's more than 40 years of experience in understanding how to make money in the market is that fighting the trend of the market is a great way to lose money. A down market makes weak stocks weaker and shaves the margin of safety in stronger stocks to a perilous thinness.
Patience will help you get through a dark spell--whether it's the short, short days of December or the irritating fluctuations of a cranky market…..
Sincerely,
Paul Goodwin
Jump to Comment Form
Discussion (0)
There are no comments for this entry.