Value investing is boring! I can hear some of you shouting “HELL YEAH!”. It’s boring because sometimes we need to wait for eons before our investment reaches the intrinsic value. It’s boring because we don’t get instant gratification and prices take a long time to move (I know you are thinking about Kingsmen!). It’s boring because we need to sit still and have to control those itchy hands of ours.
Value investors need to have lots of patience and discipline (and I really means LOTS). When we buy into a stock, we should not expect to make money immediately. In fact, we must be mentally prepared to lose paper money in the short-term. It most probably will take a long time for the stock to rise up to the intrinsic value. In the meantime, we need to sit still like good boys and girls and not meddle with our portfolio. The trader in us always wants to do something like sell off when there’s a small profit and cut loss unnecessarily, thinking we can buy back later. We have to control the urge to do that and remember that we are in this for the long-term. If the business fundamentals are intact, we should just sit on the sidelines and not do anything. When the price dips and goes down tremendously, we must have the discipline to not hit the sell button out of panic (provided the business is still flourishing).
Currently, some stocks in my portfolio are down and my China ETF is down 10% as of today due to the negative market. I’m willing to hold on to them as I believe they are undervalued and have lots of room for capital appreciation. I do feel emotional at times when my stocks are down but I need to keep on reminding myself that I’m in this value investing business for the long-term and am not here for short-term gains. Having more patience and discipline is what I need to work on and am working on it constantly. For the short-term, the prices fluctuate up and down but value is what I get for the long-term. Value investing is not easy due to the strict discipline and patience we need to have. This might explain why not many are into value investing. Having said that, those who have control over their emotions will see tremendous benefit for the long-term and I believe in this. Many have been there, done that. People like Benjamin Graham, Warren Buffett and Peter Lynch are/were great value investors due to their emotional control and they have shown us that it can be done with the right skills and attitude.
Actually, contrary to the title, value investing is not boring and I need to confess my love for value investing. I feel value investing is one of the best ways to accumulate wealth. All that is needed is just a bit more of mental fortitude so that we don’t succumb to unwarranted actions that will affect our portfolio.