Most of us have made the mistake of selling stock too soon. I’m guilty of it. You’re probably guilty of it. Even Warren Buffett, the man who once said: “the stock market is a device for transferring money from the impatient to the patient” is guilty of it!
Why does patience matter so much?
A study by Putnam Investments showed the performance of $10,000 invested in the S&P 500 from 2005 – 2020.
- Letting it sit and doing nothing returned $41,400
- Missing the 10 best trading days returned $18,829
- Missing the 20 best trading days returned $11,400
“But what if I missed the worst trading days?”
That’s a fair point, but this highlights the importance of patience when it comes to timing; if you sell, when do you get back in?
COVID-19 is a perfect example — if you sold investments in fear, you could have missed one of the best years for the stock market in the last decade. Newcomers tend to look at a loss in the last three months, rather than the gain in the last three years. It’s easy to jump ship on a stock in the short term. What’s difficult is holding on for 10 years or more for a potential multi-bagger.
Investing is like anything else — none of us become masters overnight. It can take years of practice to become a great stock-picker. But, defining your plan, personal goals, and doing the necessary research to familiarize yourself with the companies you invest in will reap the rewards in the long run.
Remember, investing is a marathon, not a sprint, so try not to get caught up in the short-term noise, and stick to your long-term strategy.
Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.