The antithesis of this action bias is, of course, patience. Patience is a weapon you can use to protect yourself from becoming an ADHD investor. It is required because the curse of the value investor is to be too early-both in terms of buying (known affectionately as premature accumulation) and in terms of selling. Unfortunately, in the short term being early is indistinguishable from being wrong. Patience and discipline are much needed when the bottom-up search for value fails to uncover any investment of merit. If you can't find something to invest in, then you are best off doing nothing at all. Warren Buffett often talks of the importance of waiting for the fat pitch. I call investing the greatest business in the world. . . because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There is no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it. However, most institutional investors behave like Babe Ruth at bat with 50,000 fans and the club owner yelling, "Swing, you bum!" and some guy is trying to pitch him an intentional walk. They know if they don't take a swing at the next pitch, the guy will say, "Turn in your uniform."
- James Montier
http://behaviouralinvesting.blogspot.com
Brilliant. I loved it.
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