In his blog ‘The Seven Virtues of Great Investors’ that Jason Zweig wrote about last year, ‘Patience’ perhaps could be construed as the most obvious one, even cliched, given the inherent volatility in markets irrespective of one’s style of investing resulting in periods of weak performance (absolute, relative or both). What he doesn’t say is whether patience in investing is an innate personality trait or something that we can train ourselves on.

In this lovely piece, Ian Casell, the founder of Microcap club, an investor community for collaboration on investing, highlights why such patience can be worked upon actively.
“Active patience is not an inborn ability or skill. It is developed over years and decades in the following stages:

  • Developing Your Temperament – Finding out who you are.
  • Finding Your Principles – Finding out what you believe.
  • Committing to Your Principles – Living out what you believe.
Many investors never find out who they are. Even fewer figure out what they believe. Only a select few live out what they believe.”

On temperament, he says:
“Investing is 5% intellect and 95% temperament. It means finding the strategy that will allow you to sit quietly when your emotions are screaming at you to do the wrong thing.”

Whilst he elaborates on this, his section on ‘finding your principles’ resonate with us:
“Your principles are the qualities of a business that are mandatory. Principles allow you to say no to entire swaths of the investment universe.

Your principles are the qualities of men and women that are mandatory with whom you can partner and trust. Your principles allow you to say no to certain types of people.

Principles allow you to say “Yes” very quickly because you know what you are looking for. Sometimes within 10 minutes you know “this is the one”.

Principles allow you to sell in an instant when trust is broken in a business or person.

I’ve found over the years that “value” is completely subjective. Your principles are the things YOU find valuable. They are the must haves that are necessary for you to buy and hold an investment.

You can’t expect others to completely understand your principles. It’s how you can be in a room with 100 successful investors and each person is horrified at the next person’s best idea. It’s how you can be in a room with 100 investors that own the same stock, and each investor is holding for slightly different reasons. Your principles are your uniqueness.

It takes time and reps to find your principles.

It took Buffett two decades to go from deep value to quality.

It took Sleep and Zakaria almost a decade to go from “we will go anywhere in the world to find deep value” to only investing in business models that represented scale economics shared.”

And as one would expect, committing to those principles is perhaps the hardest of the three to achieve active patience:

“Distractions come in many different forms. The shiny new ideas that tantalize us but are missing our core principles for investment. The mind games our emotions (greed, fear, boredom) play on us making us sell positions/or buy new ones that we shouldn’t. The opinions and criticisms we internalize from investors that haven’t done the work. Distractions are anything that causes us to lose focus.

Discipline means having the strength to say no to the thousands of things that distract you.
Courage means having the strength to say yes to the few things that matter.

Commitment means having unwavering confidence in yourself and your principles.”

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