An oft-repeated word or idea gives you insight into, and can help you evaluate, a person's thinking. And so it is clear that "patience" - which along with "patient" constantly came up in an SA Marketplace interview with Rob Marstrand - is of fundamental importance to his contrarian investing style. [He's advocated investing in hated Deutsche Bank (NYSE:DB) and feared South Korea (NYSEARCA:EWY), to cite recent examples.]
His emphasis on patience is a good thing because I not uncommonly hear people overuse words or expressions that are clichés, buzzwords or otherwise substitutes for having genuinely thought through issues. One example of this genre are the ubiquitous references by financial industry types to "thought leadership," as if stating the phrase equates them with its virtue, which is often not evident in their discourse; but I digress.
That Marstrand's approach refreshingly contrasts with the overly complex and jargon-filled pitches one hears from "thought leaders" can be observed in the following brief formulation:
Do your homework, be patient and keep it as simple as possible."
He is equally succinct and forthright in adducing the reason patience is so critical:
All successful investors need the willpower to see things through, a cool head when markets temporarily move against them, and deep reserves of patience. In fact - and I can't stress this enough - patience is paramount."
I think he is spot-on, but I fear investors may read past this advice, falsely assuming they possess the patience of Job, when in reality most investors are under-practiced in this investor virtue. Given that the market has all but gone straight up for over nine years amidst historically low volatility, those who are not seasoned veterans may not know the anguish of seeing their investment fall in value over years continuously, nor the itch to sell and cut their losses.
Or, it's possible someone lacking such experience might acknowledge that a new investing cycle will indeed eventually come but convince himself that he can deploy the patience that is required.
I suspect many who think this are mistaken - based on a false notion of what patience really entails. It is easy to assume that patience is passivity, that it's mere waiting. But patience is not idleness. It is a form of action, for which discipline, courage and planning are required. One acquires patience through the hard work of thinking through an investment thesis before buying a security and forming a high-conviction view of reality. If you have done that, then a slump in that security's price will signal an opportunity to buy more, and a protracted slump will signal the need to accumulate shares over a period of many years.
In other words, patience enables an investor to act as a contrarian - another term people apply to themselves because they fancy themselves mavericks without having genuinely earned the appellation. But to earn that sobriquet, you have to buy those sinking shares with optimism and glee even while those about you are glum and think you're mad.
Having read and enjoyed Rob's articles on Seeking Alpha, it is evident that he qualifies as a genuine contrarian investor, and fortunate is Seeking Alpha to host his new OfWealth 3D Stock Investor Marketplace service. We hope it will fortify subscribers with patience, which will surely not fail to resume its place as an essential investor virtue.
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- Axel Merk argues the Fed will raise rates more than the market is currently pricing in.
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- Laurence Kotlikoff argues trade wars and higher volatility are reasons to reduce exposure to risky assets such as stocks.
- Janus Henderson Investors: Diversity of thought strengthens advisor teams.
- For more content geared to FAs, visit the Financial Advisor Center.