Technology has made such dramatic advances that now almost anything can be available at our fingertips in a matter of seconds. The downside of this is that having so many of our wants and needs satisfied immediately has made many of us less patient. Waiting makes us uncomfortable.

As a result, one of the most difficult pieces of advice for investors to follow is to sit still and be patient when the action seems to be passing them by — hence the common investment mistakes of “panic selling” or “trend chasing/herd mentality”.

Warren Buffett famously said: “The stock market is a highly efficient mechanism for the transfer of wealth from the impatient to the patient.”

A patient investor can be likened to a seasoned fisherman.

A seasoned fisherman knows that there are many fish in the sea and it is not necessary to catch every fish that swims by in order to be successful. In fact, it is only necessary to catch those few that bite and fill up your net or, in the case of investing, those instruments that meet your predetermined investment criteria.

There are always trading opportunities in the market, especially during times of volatility, and so the difficulty is not so much in finding investment opportunities, but making sure the opportunities fit your predetermined investment plan.

Contrast that mentality with that of the “hunters” in the investment world.

To the hunter, investing is all about the next big score, and the only way to win is to out-hunt everyone else searching for prey. Hunters always have an interesting story to tell, and they always have their finger on the trigger. They win big but they also lose big — but you only hear about the great wins. They make investing seem exciting and fun, which is precisely why we see hunters over and over again on TV and in the news.

Patient investors do their research before investing.

Researching the investment you are interested in, or that is being recommended to you, is very important. You should seek to understand an instrument or product and know what you are getting into.

There is no such thing as asking too many questions. Never confuse gambling or speculation with making an investment. If you are acting on a hot tip or blindly picking a stock or bond, you are not investing. Investing means making a decision that you are comfortable with and prepared to stick with for a while

Remember that the return you expect comes with risk.

The general rule is that higher risk yields higher returns. Take the time to assess the level of risk involved in any investment, especially if it offers very high returns, and determine how much money you may lose if things go wrong. Once you have established how much risk you are willing to take, do not lose sight of your risk tolerance, or your capacity to take on risk.

Stay focused.

Do not invest without a time horizon in mind. If you are wanting to buy a car, that is most often a short-term investment goal; while seeking to accumulate money to buy a house is usually considered a medium-term time frame. Alternatively, if you are investing to finance a young child’s college education, that is more of a long-term investment. You should seek investments that are suitable to your time horizon.

Having done their research, and identified their risk tolerance and time horizon, a patient investor is now better equipped to know what they want and need. The same patient approach should also be taken when trying to determine if you should exit an investment.

In down markets investors are too often overcome by their “loss aversion” instincts, thinking that if they don’t sell, they stand to lose more money. The key is to determine if the decline in prices is due to general market conditions or is in fact due to a deterioration in the credit dynamics of the issuer(s) of your bond(s), which could be a pre-cursor to a default. A patient investor is far less likely to follow the panicking herd over the cliff.

In conclusion, so much of investing is psychological, making patience a great virtue for investors, but I should warn you that allowing patience to turn into stubbornness is something you must always guard against… know when to hold and when to fold. That is something we will have to cover in another article!

Toni-Ann Neita is assistant vice president, Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. For more information please visit our website: www.sterling.com.jm Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at: info@sterlingasset.net.jm