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• Similarly, adding to a position should never be rushed; I have a clear idea that I want more of a particular share and watch price movements for pullbacks in an uptrend or situations where a share price is looking like it will break out over a horizontal resistance level. Looking for opportunities is a baked-in aspect of my usual way of operating every day.
• When it comes to a stock that is in freefall, there
is no need to rush in and buy it; ‘catching a falling knife’ may suit traders, but is arguably appropriate only very rarely for an investor looking for a ‘starter position’ and to buy more once the downtrend is broken. A quality stock in a major downtrend trend will at some point break out and go sideways. The best time to buy is when the share moves up out of the sideways channel and starts on an uptrend; be patient, let the trade come to you.
The critical role of patience in difficult markets
This summer saw very dull markets and low volumes; week after week of a slowly falling portfolio is tedious and that is where patience is essential.
Take a step back and think about the big picture.
After twenty years of stock market investing I can cope with pretty much anything it throws my way; stay calm, be patient and just ride it out. I stick to my rules until things come back my way.
Markets go up and down all the time, but I can control how I react; calm and rational trumps emotional and panicky every time.
I often run scenarios in my brain when I am painting the car or digging the garden; what if the stock market
fell 10%? How would I react? What would I use to hedge my portfolio and when would I place a trade and in what size? What cash have I got available to buy bargains if we do get a big drop?
Alternatively, forget about the markets, turn off your phone and head out to the garden or local park and immerse yourself in that book by an investing legend you have been meaning to read for years; be patient, stick to your established approach, and wait for the markets to improve - they will.
I hope I have convinced you of the importance of patience; being impatient and always trying to be active does not help – investment should be a relaxed and leisurely business.
Being patient is an under-appreciated ‘skill’ but of all of the attributes an investor needs this is one that anyone should be able to attain; patience can give you that ‘edge’.
Having a diverse and mixed portfolio of quality stocks lends itself to a patient and relaxed approach to investing and interacting with the markets, particularly if you have plenty of other things going on in your life.
Stay calm and take your time, there is no need to rush. Cheers, WD.
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23 DIY Investor Magazine | Dec 2018

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