Patience, Patience: Investing

One of the hardest things for most of us to do is to wait patiently for something. If you’re like me, you hate to stand in line, delay the purchase of something, wait for the evening mail to come.

Whatever tasks you have each day, it’s difficult to be patient about their fulfillment and the results. We are a driven, impatient people here in the U.S., aren’t we?

We are nurtured on fast food commercials and are told using our credit card means we can have it and we can have it now. We don’t like to wait patiently, indeed.

So what I’m going to recommend to you as a stock investor in this article is not going to be easy. In fact, it may be the most difficult piece of information you’ve received since I started writing this column.

But it is most appropriate and necessary in the current market climate; it is also a behavior pattern able to serve you well in the weeks and months to come. I am encouraging you — no, I am pleading with you — to be patient when it comes to buying stock.

Too often we discover a stock we like and buy it quickly. We may do a little research to make ourselves feel justified we have done our due diligence, but many times it’s not enough research or, truthfully, it doesn’t matter. In a stock market climate where the bulls are running free and things continue to move upward, impatience often doesn’t have repercussions to harm us. But when the market is as dicey as this one is, patience pays off as much as or more than good solid research. Why? Patience enables us to buy slowly and steadily rather than impulsively and haphazardly.

Let me give you an example: in this market, any given stock is capable of being up in price one day and down considerably the next. This kind of roller coaster ride is typical of a bear market, when the least bit of negative news can be interpreted as the end of the world as we know it.

So let’s say you want to wind up ultimately with 500 shares of XYZ stock. Instead of buying all 500 shares at one time, or just buying them on the day you make the decision about this purchase, let’s set out a patient, plodding strategy that would work better, I think, in this market than any other strategy.

Wait patiently until a day when XYZ stock is down. In this market, you shouldn’t have to wait too long, as the market is so volatile and up and down. On a down day, then, take a nibble on the stock. Buy 100 shares. Sit tight. Wait for another day when the stock is down. Buy 200 shares. In this way, you will participate in what is called “dollar cost averaging,” meaning that by waiting patiently for the stock to keep reducing its price, you are paying less overall than if you were to buy 500 shares all at once and then have it go down a few more times.

Now, of course, this hinges on the fact that eventually — when you own all 500 of your shares — the stock now turns and goes up instead of continuing to go down. But even if it does go down a bit more after you have purchased all your shares, be consoled by the fact that your patience allowed you to get the total 500 shares cheaper than buying them all at once.

Then, once you own the 500 shares, you must sit back and be patient once more. (Sorry, if you are an impatient type, this is really beginning to annoy you, I realize.)

Now your patience becomes more about when you sell. If this is a long-term purchase and you have no intention of selling the stock in the near future, just patiently put it away from your mind and, as Tony Soprano would say, “Forget about it!” The vagaries of the market should not drive you crazy because you’re in it for the long haul.

If, however, being the impatient type that you are, you want to make a profit and get out of the stock so you can pursue purchasing yet another winner (I am ever the optimist), here’s a rule for you to obey: don’t ever sell the stock on a down day, when it is in the red. Wait patiently — there’s the nasty word again — for a day when the stock is up, and then sell it and move on.

Why do I recommend this? Because it’s a good lesson in patience and it’s a good habit to form when trading stocks. It causes you to be more confident in your ability to wait and do the right thing.

And let’s face it: patience IS a virtue, anywhere, even in the world of stock investing.