In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
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Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.
If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)
If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.
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When you deal with a discount broker, you pay a lot less to act on your investment transactions than you would when dealing with a standard broker....
—origin unknown, in use with numerous variations, since at least the 1970s
I’ve mentioned many times over the years that the quote above is one of the wisest investment one-liners I’ve come across. However, it can be useful or misleading, depending on how you interpret it.
The best use is to take it as a reminder that in a healthy, rising market that has additional gains ahead, you never run out of things to worry about....
Back when this burst of growth was just getting started, most venture-capital investment managers acknowledged that perhaps only one in 10 of the deals they financed wound up making any money for investors....