Value Investing – Principle #4: Patience (Lesson 9)

Value Investing

“To lose patience is to lose the battle.” Mahatma Gandhi

The most difficult principle to adhere to with value investing is patience. There is a mindset that when you have a high level of confidence with your decision model, you are eager to see it come to fruition. The trouble with this is that others in the market don’t see it the same way as value investors. There are so many different investing programs, thoughts about buying and selling and pure greed. All of this combined creates volatility in the stock markets. Reasonable volatility, found with large-cap and DOW stocks is what value investors seek. Volatility with mid and small-cap stocks shifts the mindset from value investing to active trading in order to earn good returns. Market fluctuations are necessary in order to create the opportunities to realize gains. The other investing systems, programs and greed cause fluctuations along the spectrum of tiered markets. As the spectrum tends towards the lower end of the tiers, volatility increases. The upper tier, the value investing zone of large-cap and DOW stocks does experience fluctuations but nowhere near the volatility of the other zones. 

Value investors must be patient to allow these competing forces to sometimes align with each other to either depress or magnify the entire market, an industry or a particular company. When the market causes a certain stock to depress to the value investor’s preset buy price, an opportunity exists and the value investor snags up a good deal. If irrational exuberance kicks in, opportunities to sell are presented and gains are earned. In the interim, value investors must simply wait.

There are so many similes to many life experiences, they all can’t be listed here. One good example is that patience in the stock market is like hunting from a deer stand. You know the prize will show itself at some point. Years of experience and lessons learned reinforce your basic

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