One Common Misunderstanding in Value Investing: Patience for Buy

Patience is the state of endurance under difficult circumstances (ref. Wiki). In stock market investment, there are two very difficult circumstances that investors need to endure - Bull Market and Bear Market. In this article, I am going talk a little bit about Patience in Stock Market investment. Particularly, I would like to share my insight about the role of Patience in both Bear and Bull Market.

 

Bear Market

Situation:

• During Bear Market, market is full of bad news. The trend of market price goes downward in a long period of time. Most investors lose their faith in market.   

Good Patience

• I think we should be very patient to wait for very attractive deals for long term investment during Bear Market. After 'estimating' the bottom line of each good business, any deal with more than 50% discount is already a very good investment for me.
  

Bad Patience

• One bad Patience is to be very patient to wait until other people are optimistic about the future of the market. These kind of people do not like to do homework. However, they are very hardworking to find 'tips' and to 'dance' together with Mr. Market.

 

Bull Market

Situation:

• During Bull Market, market is full of good news. The trend of market price goes upward gradually. Most investors are very optimistic about future.  

Good Patience

• I think we should be very patient to wait for attractive deals for long term investment during Bull Market. Since many uncertainties have gone, any deal that has more than 30% discount can be considered a very good investment for me.

Bad Patience

• One bad patience is to be very patient to wait for market collapses, bubble bursts, and so on. I still remember during the second half year of 2009, many 'investors' discouraged other people to enter market (buy in) because market was already rebounded 'significantly'. If you look back now, it was a very bad decision.

 

Luckily, my mentor always reminds me that we should buy in as long as we can find a good deal in the market. After practicing his advices for years, I do achieve my investment goal annually.

 

In short, please do not simply be patient. We should make friend with Bull and Bear. That's all for today. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates.

Written by: Xaivier Chia

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.


Updated: 27 Jan 2014 - Proof-read.

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