You have always been warned about get rich quick schemes, even though you may never have understood why. What is possibly wrong with becoming wealthy overnight? The answer is that in order for you to build up lasting wealth effectively, you must employ a long term strategy.
The great Confederate General Robert E. Lee had some very appropriate quotes on the subject of patience. When he was asked about how he decided on his military command appointments, he said that he could not place in command of other people an individual who was unable to control himself.
This is why the hardest lesson that you can learn where your investments are concerned is the lesson to be patient. In the paragraphs below, you will understand why doing nothing is often the most effective way to improve your investment performance over the long term time frame.
Why is the Simplest Lesson of Sound Investing Also the Most Difficult?
The simplest lesson for you to learn and use in your own investments is one of patience. In theory, this is so easy and obvious that you could even train a monkey to do it. While it sounds too basic to simply do nothing where your investments are concerned, the actual practice of this often proves to be extraordinarily difficult for the majority of people. Consider how few individuals are able to accomplish the art of waiting and doing nothing.
The reason that doing nothing is so critically important for your investment strategy is because the major gains that you will make in your investment career lie in the few really big trades. The nature of these necessary big trades is such that they do not appear on a daily, weekly, or monthly basis. In fact, just the opposite is true.
The really big trades are rare and wonderful.
For you to successfully make much money in your life, you will have to find the really big trades, which can be the easy part. Then you must discipline yourself effectively so that you can wait out the successful gems of trades. It is not so hard to find a winning trade.
It is extremely hard to allow such a trade both the time and opportunity to run, in order for it to reach the really big returns. If you are unable to learn this simple to grasp yet hard to practice skill, then you will never become truly wealthy through investments.
Legendary Investor Jesse Livermore Teaches Patience in Investing
In 1923, a legendary investor Jesse Livermore published a book called “Reminiscences of a Stock Operator.” In this book, he summed up the importance of doing nothing in your investment strategy. He stated that he had been involved with Wall Street for a number of years. In this amount of time, he had both made and lost millions of dollars.
Jesse tells you that his thinking and plotting never made him really big money. Instead, it was when he sat and waited that he captured the big returns. Individuals who are able to be right and patient are rare and unusual indeed. It may surprise you to learn that the patient part is the more elusive quality of the two.
Recent Examples of Huge Trades That Required Doing Nothing
At the end of 2006, the housing market sent signals that it was going to crash and burn. Shrewd investors like Goldman Sachs Bank and hedge fund manager Henry Paulson realized this and took positions against the housing market. Others shorted stocks and waited for the inevitable crash. The markets plummeted more than fifty percent over the next three years. To capture the really big gains and not simply bank ten to twenty percent, you had to wait almost three long and tumultuous years.
In March of 2009, the stock market finally reached a bottom in the wake of the devastating financial crisis that began in 2007. If you were among the individuals who realized this at the time, you might have purchased stocks aggressively. You could have made fifty percent if you had bought in and then held on tightly by doing nothing until 2011. To realize these fantastic gains, it required that you took no action for two exuberant years though.
Back in 2001/2002, gold had bottomed out at $250 per ounce. Many pundits were calling for the end of gold as a serious commodity. They simply scoffed at the archaic notion of gold as a currency. Even wealthy G7 nation Great Britain chose to dump half of its once considerable gold reserves at this pitiful low price point. If you bought in at that shockingly low price of $250 to $300 per ounce, then you could have doubled your money by 2006.
In order to realize the more considerable gains of five hundred percent, you would have to sit tight for another five years. Some analysts, such as Standard Chartered Bank of London, would tell you that selling at today’s prices of over $1,600 per ounce is too soon. There may be prices as high as $5,000 plus per ounce of gold in the future for those of you with the patience to sit still on your gold holdings and do nothing.
Silver is another case in point. At the beginning of this new millennium, you could acquire silver for a song price of $4.50 per ounce. It could hardly be mined from the earth at this cost. You who possessed some foresight and patience purchased this other precious metal and waited for eight years. In 2009, you might have sold it for a tidy four hundred percent profit at $18 per ounce.
Those of you who exercised patience a little longer and did nothing might have realized upwards of $50 per ounce, or a thousand percent return, in 2010. Once again, the best i still yet to come for silver, so even if you took profits at $50 an ounce, you might be cheating yourself of the opportunity to make some really serious gains in the ongoing silver bull markt.
The greatest opportunities may yet lie ahead for you if you can but learn the critical lesson to sit and do nothing. We live in the middle of the famous Big Ben Bernake Asset Bubble. By the time that the Federal Reserve has finished devaluing the U.S. dollar with cheap interest rates and their electronic printing presses that are working around the clock, this might end up being the most spectacular asset bubble that the world has ever witnessed in gold, silver, and stocks. To emerge a winner from it though, you will have to place your proverbial bets wisely, then walk away while they grow, grow, grow.
Impatience is your most powerful and constantly lurking arch enemy. Do not give up your screaming winner investments too hastily or easily. You should not settle for a paltry doubling of your money when you can instead realize gains of possibly multiple thousands of percent simply by waiting. You might emerge from the present economic turbulence far wealthier than you can possibly imagine.
Ask yourself a deep question - how often do these kinds of enormous opportunities present themselves in one life time?
Thomas Herold is the CEO of Wealth Building Course and the author of ‘Building Wealth with Silver’. Get 3 free chapters now and find out why silver is the hottest investment opportunity right now. For more financial education check out his website: Wealth Building Course.