Why Patience Is a Friend of the Investor

I’ve been following the stock market professionally for the last ten years and I’ve learned a few things about picking stocks.

Every investor approaches the market and the investing process in a different manner. No matter what anyone advises, you have to develop your own approach to investing–one that only you are comfortable with. It takes patience and practice to figure this out.

After analyzing and following hundreds, perhaps thousands of stocks over the last ten years, my experience tells me that some of the best wealth-creating companies aren’t initially on Wall Street’s radar screen. This isn’t much of a surprise. Very often, by the time Wall Street develops a “buzz” about a company, the big money has already been made.

The same situation applies to the media. Once the story appears in the newspaper, it is often a sign to cash out or take the opposite position.

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As a full-time investment analyst, one of the most useful things I’ve learned about the equity investment business is to do absolutely nothing. That’s right–nothing! The best way to make the most amount of money in the stock market is to do nothing, but watch and wait for only the best opportunities to present themselves. In the interim, leave your money in a mutual fund or money market account.

At any given point in time, there are only a few really attractive investment opportunities available. Most won’t appeal to you. For example, if you’re a momentum trader, you don’t want to know about a company with great long-term prospects. If you are a value investor, you likely don’t want to know about a fast-growing, expensive technology stock.

In the end, I’ve observed that the best wealth creating portfolios mix things up a little. In my view, a successful equity portfolio will have a number of short-, medium-, and long-term holdings. Perhaps a couple of momentum trades. Perhaps a turnaround situation also.

What I’ve learned is that it is wise to mixed things up, manage your money like a professional, and wait to act upon only the best investment opportunities.

In the interim, you can rest easy with your current positions.

Follow all of the markets all of the time and eventually, the best investment opportunities will jump out at you.