“A man watches his pear tree day after day, impatient for the ripening of the fruit. Let him attempt to force the process, and he may spoil both the fruit and the tree. But let him patiently wait, and the ripe fruit at length falls into his lap.” – Abraham Lincoln
The bond and stock markets have been stuck in a range for about the past 18 months. The Dow Jones Average keeps moving back and forth between 16,000 and 18,000. For investors, this can be very frustrating. It feels like you are running in place and making no progress.
It has been said that patience is the greatest virtue. We live in a world where it seems that patience has been forgotten. In our “instant everything” world people want it all, and they want it now. They don’t think in terms of paying the price or investing for the long-term. They act on a whim, rather than follow a long-term plan.
Mountain View High School in Orem has always had a very successful track team with several runners nationally ranked. I asked their coach why his runners are so successful. I thought he would tell me strategies that help make his athletes stronger and faster. Instead, he shared with me his secret that was completely different than I expected. He said that much of their success comes from learning to pace themselves. They must have the patience to wait for the perfect time to make their final move to win the race. Counterintuitively, even in running, a sport that is built around speed, exercising patience is critical to success.
Every autumn I spend some of my spare time hunting for big game animals. I focus my efforts on finding animals that have “record book” potential. In order to locate them, I backpack into places rarely traveled. Often I come back empty handed. In my quest to find trophies, I have traveled to some very dangerous parts of the world. In order to succeed, I often hunt differently than traditional hunters. While there are several factors that contribute to my success, I believe that extreme patience is the most significant.
Patience is also a key attribute for successful investors, but it can only work if you adopt the right kind of smart investment strategy we previously discussed. Without the right strategy, all the patience in the world is essentially worthless. However, as soon as you put a solid strategy in place, it’s all about patience, self-control, patience and of course more patience.
This is one of the most difficult steps for investors, and it’s something we constantly reinforce with our clients. Patience goes against human nature, and a lack of patience has ruined many sound investment plans.
We are constantly positioning our funds to take advantage of whatever the markets will give us. We never know in advance when we are going to be rewarded. Sometimes, we spend months waiting. Following this process in the past has yielded tremendous rewards.
The portfolios we manage at Paragon have tested our patience during periods of underperformance. By exercising patience and staying invested, our conservative portfolio has met its objectives since its inception in 2001. Paragon’s growth portfolio has also generated outstanding returns and met its performance objectives since its inception in 1998.
Our clients who exercised patience during periods when our portfolios’ returns went flat or negative still received outstanding returns over time. The market does its best to make investors give up at the worst possible time. For example, when you review our track record you see that our best returns almost always follow the years we have lackluster performance. Unfortunately, investors who did not exercise patience and stay invested during the rough times missed out on those returns, even though the overall strategy was solid. As our track record shows, patience keeps you focused on the big picture and is critical to long-term investment success.
We have discussed several fundamental rules for investing in the past few issues of this magazine. The rules that we have discussed apply whether you have a large or small amount of money. Once you are following a solid strategy, patience is fundamental to your long term success. Assets appreciate on their own schedule, not mine or yours. Building wealth is possible—if you follow the rules!
Disclosure: Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Do not rely upon this information to predict future investment performance or market conditions. This information is not a substitute for consultation with a competent financial, legal, or tax advisor and should only be used in conjunction with his/her advice. Past performance is not a guarantee of future results.
Dave Young founded Paragon Wealth Management in Provo, Utah 29 years ago. His investment methods have attracted national and local attention. He has been interviewed by BusinessWeek, CNBC, the Wall Street Journal, the Deseret Morning News and other national and local media