Why Patience is a Virtue in the Stock Markets?

Many of us are tempted to make a quick buck. How does not matter, most often. What if I told you there is a great way to make money (sometimes quickly) that too legally? Well, Stock Market is your answer. I am not suggesting that is an easy way though. You have to have decent knowledge of how the markets work. I have over 10 years of experience investing directly in stocks and also via mutual funds. The journey has both been rewarding and bumpy at times, and in each case, I learned some lessons – most important among them being ‘patience.’

For a novice, let me lay it out for you how the markets could have made you rich in the last few years, or could still make you one in the next.

India stock markets have had a phenomenal run in the last couple of years, courtesy reforms initiated by the Narendra Modi government (primarily). Even though the indices are hovering around all-time highs since many months, every other day there is news of yet another high. This has been testing the patience of those who have been waiting for a dip to invest. On the other hand, those who had the patience to stick with their portfolio – or even churn it in favor of better-performing stocks over the course of time – have been rewarded handsomely. I belong to the latter category, and that’s why I term it a virtue to have patience. I didn’t sell some of my best-performing stocks in bad times. I believed in the business model, growth potential, and management of those firms.

I’ve also had days when I made good money overnight (through But Today Sell Tomorrow feature), but some of my picks still kept on going up even after I got rid of them. It doesn’t worry me much though – what if they had gone down if I had not sold them? You could taunt me that I didn’t have enough patience to continue for a bit longer. But patience doesn’t mean being foolish. My principle is, one should have a benchmark level where you say I am satisfied with the return. It could be 10%, 50%, 200% or any number one is comfortable with. The tenure of investment varies too – sometimes, you might realize that return in just a few sessions, while in some cases it might take years. Those who stick with their investments for multiple decades have that much patience – and nothing wrong in that too. It just depends upon an individual’s approach.

Let me talk about Reliance Industries here. Who would have believed it would be a terrible performer for many years – but it was! I had just a handful of shares of that company from my pre-MBA days (before 2007), but it was not until late last year that it started showing some growth. After about 40% return in the counter this year alone, I sold my holding in the stock a few months back with a decent profit.

Don’t let me paint a rosy picture here. Every day is an opportunity for me, but it also tests my ability to take risks. There have been times when I lost patience with a stock and still sold it at just the break-even. An example being of Manappuram Finance, which I bought in October last year (in the hope of keeping it for long) for around Rs 97 and had to sell it at Rs 99 after 8 months. Well, I got tired of it, while a lot of my other picks jumped well in the same timeframe. Again, what is the point in being emotional about an investment if it is not working out for you? So, while I say patience will reward you more often than not, being logical is another factor to be kept in mind.

So, where does it leave us? Here are my two cents:

•        Invest only the surplus cash – do not play with the amount that runs your family.
•        Learn over time – see what has worked for you and learn (especially) from mistakes.
•        Set your limits – how much return you are content with over what tenure.
•        Be patient in tough times – if making money was so easy, everybody would be rich.

As for the foreseeable future, I strongly believe the Indian markets are on course to generate solid returns. Do you have the ability to take the plunge and then be patient enough to see it perform well for you? If you ask me, I am game.