It’s a Saturday Night and needless to say there is nothing bearable to watch on TV, so I thought I could spend an hour or so creating a Draft of a new Blog Idea I have had kicking around for a while. As it played out, I looked through my list of possible Blogs to make a start on and nothing was really leaping out at me although I remembered an idea I had recently to do one about the importance of being Patient - and because it is something I profoundly think could help many Readers hugely I decided it would be quite an ‘exciting’ thing to write (that gives you an idea of how dull the garbage on the TV tonight is !!).
I am bemoaning the TV there but in truth I must just sing the praises of that ‘James May’s Toy Stories’ series which was first shown on the Beeb perhaps 3 years ago or around that but it has been recently repeated on something like the Discovery Channel and tonight while I was troffing my Curry they had the one where his team of genius Engineers (basically a chap called ‘Simmy’ really) build a Motorbike and Sidecar out of Meccano and then attempt to ‘race’ it around the Isle of Man TT course (I say “race”, but in truth it only does something like 7 mph). This is all relevant because the ‘Skill’ of Patience is written all over this utterly insane challenge and obviously applies to the painstaking and presumably utterly tedious task of creating the Bike out of thousands of tiny pieces of Meccano and their associated tiny Nuts & Bolts and Washers and stuff but also because so much of it had to be machined to make items like a Final Drive Chain and an incredibly complex Wheel (well, 3 of them in fact).
So immense Patience was needed in the construction but also James May and Oz Clarke needed limitless Patience in riding the damned thing so slowly but also for the many repairs and adjustments and of course the Police Outriders and Members of the Public needed buckets of Patience as the Cars tailed back for 4 miles behind the Bike !!!
Where was I? Oh, yeah, Patience. Before I leave James May, might I add that Meccano was invented by Frank Hornby in 1898 and hence another Stock connection to the rather troubled Company of the same name with the Ticker HRN.
Back on Investing, it often strikes me that Robbie Burns, The Naked Trader, has large reserves of Patience and he often mentions this in his Books and on his Website etc. Clearly this has helped him to hold on to some incredible Multi-Bagger Winners like GB Group GBG and Accesso Technologies ACSO (which he had originally as LOQ and has held for years so he must have made a mint on it) and of course he has held Telecom Plus TEP forever partly because he is a Distributor but he mentioned many years ago that he got a Dividend each year which was something nuts like £35k a year - even back then !!
I also remember listening to the excellent Steve Markus @smarkus on a Podcast he recorded with @Conkers3 where he said something along the lines of “If in doubt, do nowt” which very much is the essence of Patience and I think far too often People tinker with their Portfolios and think of ‘excuses’ to take a particular course of action when really it is a psychological inability to damp down their overwhelming urge to ‘Do Something’ - it is a drawback of our Primitive Monkey Brains that we always feel that we should be active and doing stuff to our Portfolios when in truth the best thing we could do is just leave it alone !!
I picked up the phrase ‘Studious Inactivity’ from somewhere and I think that sums up the application of Patience a treat.
You can listen to Steve’s Podcast here:
Why Patience is important
I often think that Patience is an extremely underrated ‘Skill’ for Long Term Investors (note, I have deliberately mentioned “Long Term Investors” - what I am talking about here only applies to a small extent to Short Term Traders who will have a requirement for Patience in how they do things but are often in a situation where Decisions need to be made very fast and the ability to make quick and generally correct Decisions is essential. I doubt many People are actually capable of this) and although I have been quite blessed in terms of my own levels of Patience (except for when anything related to IT goes wrong - I have no idea why but it just totally flips me out in seconds and it’s a strange side to my character. Perhaps this IT glitches hate is an antidote to my normally calm and Patient demeanour - a ‘Safety Valve’ which boosts my Patience otherwise !!).
I am not sure that I really understood how important Patience was in the past. Generally in Life I have always been pretty calm and Patient and thoughtful and my Motorcycle Accident in 1998 which left me paralysed from the Chest down and a permanent Wheelchair User forced an unbelievably high level of Patience upon me and I have little choice but to accept that many of the most basic things in Life can take an absurd amount of time. For instance, if you are Able-bodied then you can pull up at your destination in your Car and switch off the Engine and grab your Fone and the Keys and open the Door and get out of your Car in mere seconds. For me, such an exercise probably takes at least 5 minutes and involves building up 4 components of my Wheelchair which can be quite fiddly and lifting myself by my Arms out of the Car and into the Chair etc. It is a frustrating process very often and especially when you get caught in heavy Rain - that is annoying. The bottom line though is that I have no choice and I just have to accept it and if you try to fight it you will be driven nuts.
But the upside of course is that this perhaps helps me exploit a very high level of Patience when it comes to my Investing.
For the vast majority of my Investing Years I have always bought into the idea that Patience was important but I think in reality I was simply trotting out a line and had never really thought about it in the way that I have in more recent Years and it is only when forcing myself to write a Blog like this that I really am obliged to confront the Subject of Patience properly and the more I write, the more I realise/appreciate how it can help me. I think it is fair to say that in the past I paid ‘Lip-service’ to the Concept of Patience but certainly didn’t exploit it in an overt and deliberate way - if I did demonstrate Patience then it was probably more by accident (or lethargy/laziness) than by a Conscious and Deliberate Design. Damned shame really because I am sure it would have helped me in my earlier years !!!
As I see it, the ability to recognise and exploit your own Personal Reservoir of Patience can provide the following Benefits for a Long Term Investor (some of this could apply to Traders):
To enable this relaxing and ‘Free’ life, my focus these Days is on holding a Diverse Portfolio of Quality Stocks and making fewer Buy and Sell Decisions but each Stock must bring something to the ‘Portfolio Party’ - be that in terms of Income, Growth, Stability, Diversification, Sector exposure etc. I emphasise Quality Stocks here because if you buy more Junky stuff, then you can probably forget about Patience and the key skill you need will be Luck !! WheelieBin Stocks need lots of effort and focus and if you are not able or prepared to put in the time, then you simply should keep well away. I often say that as Investors / Traders we nearly all start off precisely the wrong way - the common mistake is that when we begin we buy as much AIM Garbage as we can but it is only once we have had our Rears kicked hard lots of times that we realise that Buying Quality Stocks is a much better way if we have loads of other distractions in our Lives (sadly many People get so disillusioned that they give up altogether). It is such a shame that we don’t do it the other way around - we should start off Learning the Ropes with Quality Stocks and then go to the more Speculative Junky Stuff when we are much more experienced. It is like Learning to Drive but having your first lessons on the Motorway !!
It has taken me a while but I have got my ‘Normal’ ISA down to 40 Stocks now and that in itself instils a lot of useful discipline which helps the Patience side of things and in my Income Portfolio I hold 12 Stocks at the moment but ultimately I am prepared to take that up to 15 Stocks as a Maximum. With the Income Portfolio I really take the Patience thing to an extreme and I think so far in 2018 (it is June at the time of writing) I have only done one Trade in this Portfolio !!
Allied to having a Diverse Portfolio of Quality Stocks, another importance aspect is to get in the habit of ‘Thinking Ahead’. If you have a set of Rules for your Portfolio which pre-determine what Action you should take in certain circumstances then this helps things (for example, if a Stock has a Profit Warning then Sell the Holding or something like ‘Sell Half if your Stock Doubles’, that sort of thing). In terms of Thinking Ahead, it is pretty well-known that the Winter is the best time of the Year for Stocks and that Summer is usually pretty hard going - so aim to lower your Exposure as we go into the Summer and be prepared to Buy if we get a good Sell-off in the Autumn which is quite normal. Thinking Ahead buys you time - it is very rare that a Decision for an Investor has to be instantaneous and a Snap-Decision - if you are doing this, then you are probably making a Mistake.
That’s it for Part 1 - the next bit goes into Particular Instances where a High Level of Patience is a big help. At the time of writing this we are going through a very painful Week on the Markets and this is clearly a time when the ability to be Patient and to ride out the Pain is extremely important for Long Term Investors - the worst thing you can do is to get spooked out of Quality Stocks.
I mentioned the ‘Power of Compounding’ somewhere in the Blog so I recommend that Readers have a look at this Blog which is extremely important:
This Blog is about ‘Free Money’ - the importance of Dividends:
Somewhere in the Blog I talked about having a Set of Rules for the Portfolio and how you manage it - this Blog might help:
29/6/2018 01:30:37 pm
3/7/2018 11:40:05 pm
Hi Paul, thanks for that text - it is very useful to see how you go about things and where our approaches are quite similar and where they differ.
18/7/2018 07:28:12 pm
Very interesting but would benefit from a link to Part 2! Apologies if I missed it
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