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Patience

When most Americans think about the greatest investors in history, the names that will always appear near the top of the list are Warren Buffet and his partner Charlie Munger.  But did you know that 40 years ago they had another partner named Rick Guerin?  The three made investments together in the 70s, but then Rick disappeared from the public eye while Warren and Charlie became the most famous investors of all time.

A few years ago, someone asked Warren what had happened to Rick.  Apparently Rick, looking to speed up the growth of his wealth, leveraged his investments using margin loans.  When the market hit a rough patch, his margin loans got called and Rick had to sell his shares of Berkshire Hathaway for about $40 per share.  Those shares trade for roughly $430,000 per share today.

When asked about Rick, Buffett said:

“Charlie and I always knew that we would become incredibly wealthy. We were not in a hurry to get wealthy; we knew it would happen. Rick was just as smart as us, but he was in a hurry.”

Rick Guerin is not unlike many of us.  We all want to have the best investments in our portfolio, but sometimes the rewards we seek don’t happen at the pace we would like.  The market can be brutal for an investor who does not have the patience to bear the risks of the market.  The US equity market has produced a positive return on a daily basis 52% of the time since 1871, just a little better than a coin flip.  During that same time period, markets have been positive 68% of one year periods, 80% of five year periods and 88% of 10 year periods.  And investors who have been patient enough to stay in the market for 20 years have never had a negative return while the worst annualized return over such a stretch was over 5%.

We get frequent questions from clients asking what we are recommending based on the issue of the day.  The reality is, we don’t react to news or political policy.  We’ve seen gut instincts proven wrong too many times to bet our money on guessing the direction the market will move.  The course to take right now (as always) is to put your money in the market and to exercise patience while the market does its thing, slowly, but surely.

If you are worried by the market’s high valuations and are looking for direction on how to invest your money now, please reach out to one of our advisors.  We would love to help you get on the right path.

 

Written by: Shaw Pritchett, CPA

 

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