Investing is a Boring Business

We have not posted in a view days, but in the interim we have received several emails asking us for some new picks. Well, we´re sure looking, but we have not find any stocks yet that meet our criteria of low downside risk and high upside appreciation potential. For now we´re just sticking with our  current holdings, which are doing quite nicely. We are of course tracking a couple of potential interesting investment gambles, but they have not gone down enough in price so that downside risk is limited. Which brings us to the topic of this post: Successful Investing is a Boring Business.

From our experience our biggest gains have come from just buying a stock, putting it away, and waking up two years later and finding that it has tripled or more. There is really not that much else to do in the interim, but sit on your hands and watch as the business grows and the stock appreciates. Pretty boring! It really requires tremendous patience to wait for good investment ideas or themes to come along and then an extra dose of patience to wait for the stocks to appreciate (or stop falling).

The problem, of course, occurs because of the sometimes long time period that can elapse between each new investment gamble. It appears that most of us don´t have the patience to wait for the really good play and so we invest in sub-par ideas just to shake off the boredom. But think about it: All you really have to do is find one or two really good ideas and sit on them for decades. It´s boring, but it works. Just ask those who invested in Berkshire Hathaway when Buffett took over.

It actually occurs to us sometimes that the truly legendary investors, like Buffett, are different from the rest of us, not because of any intellectual gift, but solely because they possess a unique psychology that gives them an almost godly patience to wait for the right opportunity and then an extra dose of godly patience to sit on that investment for decades without being pulled into financially-precarious situations because of a need for "action".

So in sum: We think the best investment advice, in most times, is probably to do nothing. An added benefit of the do-nothing, boring investment philosophy, is that when opportunities do arise during times of uncertainty (e.g. big corrections) or change (i.e. out of favor companies are on the mend), you´ll have the energy and liquidity to take advantage of cheap prices for equities.

Comments

[Steven Brachman]

Great article! Should be read and practiced by all!