Good things come to investors who wait
By Joel Dresang
Stalled in traffic the other day, I discovered that I am patient. Sure, I was frustrated. But I wasn’t lurching into the parking lane, vainly trying to pass the clog. I wasn’t pinballing from one side to the other, jockeying into momentary gaps between cars. I wasn’t raging into the Hulk.
My inclination is to pick a lane and stick to it — then keep my eye ahead for signs that I should detour.
Before I left home, I was reading about the investment markets. Stocks have been selling off for weeks. Bond prices have been sinking amid interest rate hikes by the Federal Reserve, which is trying to squelch the highest inflation in 40 years.
It occurred to me that the patience I felt in the snarl of cars on Capitol Drive could help me in thinking about my investment portfolio.
In fact, Steve Giles had mentioned the importance of patience on a recent Money Talk Podcast. He noted that as prices of current bonds decline, patient investors should anticipate higher yields on certificates of deposit and other accounts at banks and credit unions.
“Patience remains the challenge, counting on appropriate balance to ride out the current storm,” Kyle wrote. “But patience, ‘staying the course’ we often say, isn’t about inaction. It’s about small but necessary course corrections to ensure we remain true to the plan.”
Patience is a necessary virtue for long-term investors. It directs us to stay still instead of rushing for the exit during stock sell-offs. It cautions us to remain calm as we watch the declining value of bonds we may be counting on in the short run.
“The road to achievement is a long one, and those without patience — who want to see results immediately — may not be willing to walk it,” the Greater Good Science Center at the University of California, Berkeley reports.
Or, as Warren Buffett is said to have said, “The stock market is a device for transferring money from the impatient to the patient.”
In fact, preaching patience to investors is pervasive:
- “Patience Pays for Investing Decisions,” Kiplinger’s personal finance magazine proclaimed in December, as its senior editor noted the folly of abandoning stocks in the swift sell-off that occurred last Thanksgiving.
- “Why Patience Is the Most Important Factor in Successful Investing,” The Motley Fool wrote in the summer of 2020, when the markets were still struggling to recover from the financial plunge precipitated by the COVID-19 pandemic.
- “Patience Is Your Biggest Investment Asset,” read a U.S. News & World Report headline following a steep drop in stock prices in the last quarter of 2018. The subhead: “A volatile market requires an investor to stay cool.”
Waiting patiently in my car, I congratulated myself. I did not bail on my investments during the sell-off at the end of 2018 or at the onset of the pandemic, over the Thanksgiving weekend or more recently. I remember that setbacks always have been temporary, and I have maintained my automated investments through my paychecks. Steady as she goes.
Then, as traffic started to unsnarl — as it always does eventually — it occurred to me that my patience isn’t perfect. I do get peeved with inconsiderateness (like those motorists accelerating their aggressiveness as the jam untangles). I have scant tolerance for strangers wasting my time (like telemarketers who don’t respect my no-thank-you). I have trouble sitting still very long for (in my opinion) idleness (like jigsaw puzzles and chitchat).
Lucky for me, academic researchers say patience isn’t just a personality trait. It can be acquired through thoughtfulness and force of habit.
We tend to lose our patience when our expectations aren’t met. (The traffic should be flowing. My financial assets should be growing.)
Losing patience can be beneficial if it helps us adjust our expectations to be more realistic.
Where it becomes a problem, though, is when our disappointment triggers a fight-or-flight response that is too emotional, impulsive or irrational. Often, patience abandons us in situations we cannot control, like a traffic jam or a stock sell-off. Psychology researchers point out though, that we still can control our emotions.
“With intentional practices, we can cultivate our patience and make it easier for ourselves to wait.” Sarah Schnitker, a psychologist and neuroscientist at Baylor University, said in an October 2021 CNN interview.
Research-based strategies for achieving patience:
• Reframe the situation. “Patience is linked to self-control, and consciously trying to regulate our emotions can help us train our self-control muscles.”
• Practice mindfulness. “Taking a deep breath and noticing your feelings of anger or overwhelm… can help you respond with more patience.”
• Practice gratitude. “If we’re thankful for what we have today, we’re not desperate for more stuff or better circumstances immediately.”
Source: Greater Good Science Center
One way to put our mind over matters that annoy us is what’s known as “cognitive appraisal,” which tries to regulate emotions by having us stop and think before reacting rashly.
“What happens when you take a split second to cast a better light on an otherwise dark situation is that you can actually upend your emotional experience entirely,” wrote Michael Sun, a psychologist and brain scientist at Dartmouth University. “What was once an idiotic, reckless driver, is now a guy just trying to get to work on time.”
By acknowledging what sets us off and trying to reframe it before we lose our cool, we can learn to develop the skills we need to be more patient, Schnitker said.
“You can also build your patience by increasing your emotional fluency, which is the ability to recognize and name your emotions,” she says. “Emotional fluency makes it easier to reappraise situations when you’re in the moment or afterward. If you change the way you think, that changes how you feel – but first you need to know what you feel.”
As with any skill, practicing patience makes perfect. Schnitker says it helps to start exercising patience in less stressful situations to build the habit.
So, although I remain calm in the face of recent investment volatility, I know that my patience needs work. I should remind myself, for instance, that telemarketers are just doing their jobs. I’ll challenge myself to create more than idle conversation the next time my family takes on a jigsaw puzzle. As for the rest of the traffic, I’ll stick to my lane and keep my eyes on the road.
Where I’ve been since the financial crisis, by Joel Dresang
Investment lessons from the last downturn, a Money Talk Video with Steve Giles
Staying active as conditions change, edited by Joel Dresang
Stocks: Long-term, consistent returns, a Money Talk Video with Dave Sandstrom
Counting on rainy days, a Money Talk article by Joel Dresang
The importance of balance, a Money Talk Video
(initially posted May 26, 2022)
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