The stock market is a device for transferring money from the impatient to the patient. So says Warren Buffet, one of the most successful investors of all time.  How has he done it?  Among other strategies, value investing –– and being very patient.

What does this mean day to day for your portfolio?  It means you will be better off if you don’t react emotionally to what is happening in the market in the short term. 

Too many individuals believe that the current price reflects the value of their investments. In effect, many see that an investment has done well and they want to buy it. In the reverse, they see that something had done poorly and they want to sell it –– an emotional reaction and very common. However, value investing is all about buying at a reasonable price and selling at a reasonable price. Not following the trend but instead, being ahead of the trend. Often, this means taking profits when the market is still going up and yet is expensive, and it means buying when an asset class is going down and become inexpensive.  Sometimes it means sitting on cash until something becomes inexpensive. Successful investors understand that the market overreacts on both the upside and the downside, which results in price fluctuations that might have little to do with long term valuation. The result is a great opportunity for smart investors to benefit by buying when the price is low –– even if in the short term the valuation goes lower. 

When you buy something out of favor, the key to this strategy is simple: patience. It’s about the waiting. And waiting. And in some cases, waiting some more. This could be longer than you want. However if you are a long term investor, don’t get impatient. Understand what you own and why you own it.  Then practice patience.  At Carlisle Financial, that is what we do.  If you’d like to learn more, please contact us.