Page 8 - DIY Magazine September 2018

THE IMPORTANCE OF BEING IDLE: PART 1 – THE POWER OF PATIENCE FOR THE DIY INVESTOR
Saturday night, nothing bearable to watch on TV,
I thought I’d spend an hour or so drafting a new idea I have had kicking around for a while about the importance of being patient.
It often strikes me that Robbie Burns, The Naked Trader, has large reserves of patience and he often mentions this in his books and on his website.
This has helped him to hold on to some incredible multi-baggers like GB Group (GBG) and Accesso Technologies (ACSO) and of course he has held Telecom Plus (TEP) forever partly because he is a distributor but he mentioned many years ago that he got a dividend each year which was something nuts like £35k a year – even back then!
I also remember listening to the excellent Steve Markus @smarkus on a podcast with @Conkers3 where he said ‘If in doubt, do now’; the essence of patience and I think far too often people tinker with their portfolios and think of excuses to ‘do something’ when in truth the best thing we could do is just leave well alone!
I picked up the phrase ‘studious inactivity’ from somewhere and I think that sums up the application of patience a treat.
WHY PATIENCE IS IMPORTANT
Patience is an extremely underrated ‘skill’ for long term investors; it is also one I have had to learn in life after my motorcycle accident in 1998 left me paralysed from the chest down.
In the past I think I paid ‘lip-service’ to the concept of patience but certainly didn’t exploit it in an overt and deliberate way; a great shame really because I am sure it would have helped me in my earlier years.
As I see it, the ability to recognise and exploit your own personal reservoir of patience can provide the following benefits for a long term investor and even some traders:
• ‘Run your Winners’ – One of the most important concepts for long term investors; if you lack patience and need the excitement of buying and selling stocks then you are highly likely to sell your great long term stocks too early and of course you can never have a proper multi-bagger - 200%/400% gains - if you always chop the legs off your stocks when they are up 40%. If you are patient you are much more likely to hang onto your great quality stocks and accept the ebbs and flows of the market. This is something I have only really appreciated
and understood in recent years; my biggest errors have been selling superb stocks way too early; I addressed this by now top-slicing rather than selling out.
• Reduce Dealing Costs – not only by trading less frequently, but by really looking at true dealing ‘costs’ – not just fees but also the buy/sell spread, stamp duty etc – they may seem small but soon mount up and are a drag on your portfolio’s yearly returns; lower costs equals higher returns - and remember the power of compounding. Making 15% a year on your portfolio, is a lot harder if you have dealing fees that add up to maybe 5%; aim for 2% to 3% a year.
• Dividends – Hanging onto your stocks delivers you dividend payments – free money! I target 10%
I AM NOT SURE THAT I REALLY UNDERSTOOD HOW IMPORTANT PATIENCE WAS IN THE PAST
DIY Investor Magazine | Sep 2018 8