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Stocks and actions can sometimes be frustrating when I keep looking at them.
But when I go on vacation to frolic in the hills or swim in foreign seas, I’m often surprised that my wallet thrives without me.
And that only helps underscore one of the key points about building wealth in the stock market: investments take time to mature.
Businesses need time to grow and increase their profits. And it takes time for the market to re-rate higher valuations to account for a company’s prospects for improvement.
idleness can be king
So it shouldn’t surprise me that my actions often work better without me. And without my constant fidgeting and meddling.
And the issue is something that billionaire investor Warren Buffett has also expressed several times.
He once said: “Wall Street makes money from activity, investors make theirs from inactivity.”
AND: “The stock market is designed to transfer money from asset to patient.”
But there is another phenomenon that I have observed in my own investing. And it is that not much seems to happen with my chosen actions for a long time.
You could have chosen them very carefully because of their attractive value, growth, and quality characteristics. But they still refuse to change higher. Or, more likely, they tend to drop a bit in the first few weeks and months of maintenance.
But despite their laziness, the underlying businesses often continue to make operational progress. So the value is building, right? And the answer is often yes. But still, those stubborn stocks don’t seem to rise any higher, frustrating!
Hoping for a quick change
One way to understand this conundrum is to think of investing like growing a new tree in the garden. Perhaps plant a sapling and wait two or three years before seeing much growth.
But even though looking Dormant, a new tree is really working hard to put down big, powerful roots to support its growth. Then when it’s ready, it quickly shoots up higher.
I heard someone on TV the other day making a useful point. They said change takes longer than we expect to happen, then change happens faster than we ever thought possible.
And relating those theories to stocks and business, there’s a good example expressed in the multi-year stock price chart of Scientific Judges.
Early stock investors waited years for progress. But the value continued to rise in the underlying business as it grew. Then one day, the stock soared big time. And the wait was worth it for the company’s shareholders.
The risk to shareholders in any investment is to become disillusioned or impatient and sell too soon due to lack of progress on the stock.
But Buffett, for his part, is used to holding out patiently. And he expressed it by saying once: “We don’t get paid for activity, just for being right. As for how long we will wait, we will do so indefinitely.”
Therefore, I find the most powerful technique to get the most out of stocks and actions is to apply patience.
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