What is common in the investment strategies of successful investors like Benjamin Graham, Warren Buffet, Christopher Davis, and many others?
They all recognize the extreme importance of being patient when investing. While this topic is often overlooked by the majority of traders who’d rather chase quick and uncalculated gambles, all successful investors know the true value in holding back temptations, and being patient.
In this article, I’ll be provided a quick breakdown of why patience is a completely underrated, and necessary skill to have, then I’ll talk about how it’s helped me tremendously in my personal investments, and finally, I’ll provide some top tips to help you stay patient during market cycles. Enjoy!
Why Patience Is So Important
In today’s world of 24/7 news cycles, constantly changing sentiments, moon boy shills, and record-high levels of uncertainty, you would be dishonest if you said you’ve never once felt lost, confused, or emotional.
At its worst, today’s financial media encourages investors to take excess action, which is actually one of the worst things one can do in investing. The most important principle in investing is not how savvy your trading chops are, but something quite the opposite: patience.
Key Benefits of Being Patient:
Tax benefits: In almost all countries, the government rewards patience by having higher taxes on short-term capital gains as compared to long-term capital gains. Take advantage of it.
Reduces mistakes: Natural bias of humans is to act. So when we hear an idea about buying a new stock or cryptocurrency, we are more worried about what would happen if we don’t buy — we may miss a great opportunity (loss aversion bias). This causes investors to have too many assets in their portfolios. A few weeks/months later these same investors don’t have the slightest inkling of why those assets were bought in the first place, and, no idea what to do next with them.
Develops conviction: A deep understanding of the token or company, it’s business model, and its ecosystem can help investors build strong convictions about the company. On-going diligence helps one understand how the company is reacting to various exogenous and endogenous events. With conviction, an investor can act decisively in either buying a meaningful chunk or leaving the asset alone. A strong conviction will allow an investor to hold on to a position when the market is in turmoil. However, building conviction requires patience and working through the tedious process that is investing.
How Patience Has Personally Helped Me
Patience is rewarding, and I’ve witnessed it dozens of times over the years.
When I first bought Bitcoin in 2013, when it was worth under $200, I safely stored a large stash of the cryptocurrency away for safekeeping. Over the years, my strong patience, and lack of desire to day-trade helped me survive the Mt. Gox Hack, which affected almost every Bitcoin trader during 2014.
This large stash has since grown exponentially in value and rewarded me nicely. I’ve since taken profits on my holdings due to market risks that are much too big to ignore, and I have absolutely zero regrets. Many other big crypto investors I’ve spoken with often refer back to their ability to remain patient as the main contributor to their portfolio.
I’ve also made a fortune with my long-term stock investments, including Apple, Microsoft, Amazon, Nike, and Best Buy, many of which have had some up and downs over the last 15+ years. By being patient, and looking at the long-term trend, I’ve managed to hold on tightly and only sell when they become evidently overvalued (when greed becomes excessive.)
When we discuss Patience, it doesn’t mean just buy into anything and hold onto it forever. You will never make money by doing that. You must also consider having an exit strategy, and only practice patience after you’ve done all your research on the investment.
For example, don’t go all-in on some random shit coin called “Spaghetti Token” and then decide to practice patient by holding it for years. This must be done with something that has a strong business model, utility, fundamentals, and a long-term growth factor.
Tips to Becoming More Patient With Your Investments