Patience. Something I have plenty of when it comes to others, but none when it comes to myself.
A simple definition of patience is the capacity to accept delay without getting angry. Patience isn’t an emotion, but rather a reaction to an emotional trigger. Patience is also the ability to endure difficult situations (“trigger”) without getting angry (“emotion”). While the strongest emotion may be fear, anger is usually up there along with love.
So, what does patience, anger and emotions have to do with the stock market and investing?
Everything.
Personal Finance has a twin called Behavioral Finance which is the Ying to the stock market’s Yang. You can learn stock charting, economics, insurance and modern portfolio theory all you want….but without knowing how to use that in the right context, with the right mindset, you have really just learned words and numbers. Emotions drive us to make decisions, it how we have survived as a species, but the problem lies in the economic prejudices we have and emotional biases we tend to use to help us sleep well at night.
Let’s take a look at patience.
Do you have the patience to ride out the volatility of your favorite investment in the choppy markets today? How about this week? Or month? Or this year? What if it takes several years to recover…do you have the patience, meaning the ability to not get angry (emotion) thinking something/someone has deliberately done you harm (trigger).
Do you have the patience to invest $250 per month, over forty years, to achieve the financial freedom desired in retirement? To see small wins today that can lead to large wins decades from now?
Do you have the patience to do the due diligence needed to be an informed investor? To read fund prospectuses, listen to earning calls & research all of your 401(k) choices before allowing the default option to prevail….and affect what could arguably be your largest and most important family asset? You have the patience to research your next vacation, why not the patience to research your next trade? It usually comes down to the strongest, and oldest, human emotion: fear.
Investing is scary, I get it! You can put in your hard-earned money and lose it. You can trust a company to insure you, and your coverage is denied. You can’t save your way to financial independence, it takes investing which means risk. And risk is scary.
How do you do it, then? With all these emotions running around in our head? We can only have so much patience when anger and fear are knocking on our doors. I say there is one superhero emotion to call on: Hope. Hope is the great equalizer, giving us the feeling of a brighter future. Hope co-exists alongside fear and helps us walk the investment path. Patience can keep anger at bay, giving us the critical time we need in the markets.
I often encourage people not to fear the markets, but to fear your emotional response to the markets. Learn to harness your emotions and you’ve just harnesses the power of your financial freedom.
Kimberly Enders CFP® CWS® CERTIFIED FINANCIAL PLANNER™
Enders Wealth Management
37800 Van Dyke Ave, Suite 125
Sterling Heights MI 48312
www.enderswm.com
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