“The stock market is a device to transfer money from the impatient to the patient.” Warren Buffett (CEO of Berkshire Hathaway)
In today’s world, patience is seemingly not a virtue. The typical doom-scroll through Facebook takes a few seconds to skim through. Posts that may or may not be of interest hazily flit past our eyes. The typical shelf life of a Tweet lasts a mere 8 seconds on average. Our kid’s attention span is shorter than any prior generation due to them getting what they want, when they want it. In the age of microwaves, high speed internet, and a litany of other conveniences, the next generation doesn’t understand what patience means, nor do they need to.
This is translating into an average holding period of stock ownership to the shortest on record (5½ months according to recent analysis by the New York Stock Exchange). For reference, in the 1950s, an investor held on to their shares for an average of 8 years. Today, algorithms and artificial intelligence place buy and sell trades in nanoseconds all to skim pennies of profits, but sheer trading volume turns those pennies into serious money.
Yet, the one of the world’s wealthiest people (Warren Buffett: #5 Wealthiest People in the world in 2022 according to Forbes) had none of this technology at his fingertips. In fact, when computers became popular back in the ‘80s, he used his computer screen to place Post-It notes on instead of actually turning it on. Instead, he read…and thought…read some more…thought…and exercised patience. He didn’t acquire his wealth by being a whimsical buyer and seller. Rather, he bought shares in well-run companies that changed the world and improved the way we live, work and play.
Day trading, while fun to talk about amongst friends, generally doesn’t accumulate immense wealth. None of the world’s wealthiest people today on the Forbes list are day traders. So, while GameStop, AMTD Digital and Bed Bath & Beyond make the headlines, they haven’t made good investments for the long term. The jury is still out as to if they will reward the patient investor with compounded wealth. For now, shares of those companies are bought and sold like yesterday’s gently used garage sale items. Most shares of those stocks have a shorter shelf life than pasteurized milk.
Gentle reader, may I suggest a superior investing discipline? Simply stated, invest with patience. Choose to invest in well-run companies that produce unparalleled goods and services that are run by proven management, amassing enormous amounts of sales and generating robust profits. Oh, and if they pay a dividend, pounce on it with gusto. Then…hold it. Don’t sell. Be patient. And then watch your wealth compound over the long term and your financial goals get met due to your patient investment in the shares of stock of great companies. Warren has done it. And so can you.
Don’t know how? A financial advisor is there to help.
Contact our team of advisors at Hixon Zuercher Capital Management at: hello@hzcapital.com
