The Power of Patience: The Biggest Edge in Investing

I want to share something with you that I think could really change how you approach investing. It’s about patience... something that doesn’t get talked about enough but can make all the difference in your success.

Less Is More:

Let me start with this: being a good investor isn’t about being the smartest person in the room. If you and I sat down to compare two portfolios: one growing at 7% a year and the other at 20%; I wouldn’t assume the person with the higher return is smarter.

What it really comes down to is their strategy. The 20% investor? They’ve likely nailed the skill of patience. They’re not chasing every stock that pops up; they’re waiting for the right opportunities to come along.

And here’s the thing: the best strategy you can apply in the stock market is patience. Imagine this: you’re watching the market climb, and suddenly, everything feels overpriced. It’s easy to feel like you’re missing out, right? That fear of missing out, or FOMO, can mess with anyone’s head, no matter how experienced they are.

Here’s a story that really drives this point home. Have you heard of Sir Isaac Newton? Brilliant scientist, no doubt. But when it came to investing, he made a mistake that a lot of people make, even till this day. In The Intelligent Investor, Benjamin Graham writes:

"Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he ‘could calculate the motions of the heavenly bodies, but not the madness of the people.’ Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price — and lost £20,000 (or more than $3 million in [2002–2003’s] money. For the rest of his life, he forbade anyone to speak the words ‘South Sea’ in his presence."

Even someone as brilliant as Newton wasn’t immune to losing patience. It’s a reminder that staying grounded and sticking to your strategy can save you from those emotional missteps.

So, it’s pretty clear that the madness of the market can affect anyone, even those with a solid investment strategy. Newton’s story is a classic example. He let his emotions take over and got caught up in the crowd’s irrational behavior.

Greed absolutely played a role in Newton’s downfall. When he saw the market booming, he couldn’t resist the temptation to jump back in. That decision, fueled by the expanding market and the excitement of the crowd, completely clouded his better judgment and it cost him dearly.

How This Works:

With that in mind, let me walk you through an exercise to show you just how important it is to wait for high-return opportunities.

We’ll look at two investors. Both earn $50,000 a year and set aside $10,000 each year to invest in the stock market. They’re both focused on finding the best opportunities available, and if they don’t find anything worth investing in, that $10,000 is saved until the right opportunity comes along. 

Now, let’s break down these two fictional investors: Person A and Person B. Both had the same area of expertise: they invested in businesses they understood. These were companies they were either consumers of, or had some knowledge about. The companies they focused on primarily operated in the consumer discretionary and consumer staples sectors. 

Person A:

CAGR: 10%

Person B:

CAGR: 18%

Here’s what happened over 16 years: both Person A and Person B invested the same total amount: $160,000. But by the end of that period, their results were strikingly different. Person A’s portfolio grew to $296,764, while Person B’s reached $503,482. 

The difference wasn’t due to any gap in knowledge or expertise. It came down to patience. Person B had the discipline to stay unattached to market prices and wait for the right opportunities that promised excessive returns.

Person A made seven investments during those 16 years, including their initial investment in year zero. Person B, on the other hand, made only three. That’s it. Three carefully chosen investments, backed by the willingness to wait for the right opportunities. 

Person A:  

Person A had a rule: they needed to make an investment every two years, no exceptions. The thought of doing nothing for more than two years started to feel uncomfortable, and they couldn’t shake the feeling that inactivity would hurt their returns. So, Person A started to get anxious. 

Even though Person A still focused on good companies, they couldn’t wait for the right price. They never held out for a major bargain. Why? Well, it's a mix of impatience, envy from seeing others succeed in the short term, and a fear that the stocks they followed would never reach a bargain price. This led Person A to make investments at fair prices, rather than the large discounted prices that would have brought higher returns down the line. 

Person B:

Person B’s approach was a bit different. They weren’t attached to the price fluctuations of the market. For Person B, saving more until a clear “no-brainer” opportunity emerged was no problem. Waiting three or even four years didn’t bother them. Even when the market went against them for long periods of time, Person B never questioned their strategy.

Person B followed the advice of Peter Lynch, who wisely said:

"Regarding somebody else’s gains as your own personal losses is not a productive attitude for investing in the stock market. In fact, it can only lead to total madness."

Person B wasn’t concerned with market rallies, nor did they get distracted by hearing about others making a fortune by speculating. They understood that their strategy would pay off in the long run.

Conclusion:

Here’s the thing: it’s human nature to think that if you want to achieve more, you need to do more. But when it comes to investing, that’s not the case. In fact, with investing, less is often more.

You don’t need to make a ton of decisions to succeed in the stock market. In fact, you only need a couple of great decisions every decade. Less really is more. Success comes from investing in what you know and having the patience to wait for the right opportunities.

It might seem counterintuitive because in our capitalistic society, we’re typically rewarded for effort and action. The more you do, the more you earn, right? But when it comes to investing, this doesn’t apply.

If you’re in it for the long haul (the only method that works btw), then don’t let greed or the fear of missing out destroy your returns. Once you start applying what you learn at the Retail Investor’s Hub, you’ll undoubtedly come across companies that pique your interest. Most of the time, they’ll be overvalued. But don’t let that excitement push you to act too quickly. Only invest when it’s obvious.