Paid For The Wait

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Today’s life is all about instant gratification.   Even though we all have heard about the saying ‘Patience is a virtue’ the world is moving towards instant gratification.  The product life cycles are getting shorter and shorter and all corporates wants to get to the D-Day in the shortest time possible to get the outcome they are waiting for.  For most of the folks in the current generation,  it is all about ‘what can I get and enjoy today’ which is very important.  No one is willing to wait for a long time to enjoy more benefits.  That is the reason we have all these FMCG companies exploiting this bias by introducing all instant XXX in their products ranging from instant Noodles to Coffee.  Life is moving fast and no one has time to even time to smell the roses, (forget about growing rose plants).

Does this kind of instant gratification work in investing?  Answer is a clear no.  Investing is all about patience and being a sloth.  Investing works best for people that are lazy and hate action.  

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 As Mr. Pascal said and I quote,  “All human evil comes from a single cause, man's inability to sit still in a room”.  We somehow associate action to being productive.  I do not want to get into the details but I can cite one example that I like the most.  There was a study which was conducted to analyze the penalty kicks by the shooter.  They found that it was equally disbursed by 1/3 towards middle, left and right.  So if you are a Goal Keeper, you have almost the same probability or chance of saving a goal just by standing in the middle and doing nothing.  But, you will be surprised to know that almost none of the goal keepers would stay in the middle but would either dive to the left or right despite knowing this probability.  Why would they do it?  Simple, they are influenced by action bias.  They are okay to have dived left or right and lose than to stand there and make other feel that they did nothing.  Most of the investment managers and investors feel the same.   They get fidgety when they are not actively engaged in stock market.

As I see it, the only profession that really pays you handsomely for doing nothing and being a sloth is investing.  You are almost paid for being lazy.  All you need to do is overcome the bias of doing something.  We go through lot of desperation in deploying cash or removing it in short times.   We may have a windfall or some profits we want to immediately invest in or we may want to quickly book profits on something that went up in a jiffy (even though we may do better holding it for long run). On the contrary, we want to exit from investments that have lagged or dragged your returns down in the short run of say past 1 year.

Investment is like gardening or parenting.  You cannot expect a seed to give you fruits or vegetable right from day one or you cannot expect your kids to be productive on day one.  They become productive over a period of time.   We need to approach investing like that.  All we need is to water or nurture them and understand them better and wait until they bloom.  In fact, we are paid to wait and we will be paid handsomely. 

If we find a golden goose and we have bought it, all we need to do is wait until it lays its next golden egg.  We should not try to cut open its belly to find all the gold (instant gratification) , neither should we try to sell the goose and try to buy a crow that is painted golden.  Be patient and always act only when there is a need to.