The end of 2024 is almost upon us.
In just a few short weeks, we’ll be entering 2025. And in the meantime, I’ll be focusing on three key topics here in Market Insights…
Reflecting on the past year to learn from both the market’s triumphant and challenging moments.
Exploring future opportunities to uncover promising investments.
And most importantly, sharing invaluable lessons to help you grow as a smarter, more successful investor.
Today, I want to share one of my favorite lessons…
It’s one of the simplest, yet most difficult to put into practice – patience.
They say patience is a virtue, and that’s absolutely true in both the stock market and in life.
When it comes to successful long-term investing, one of the most often overlooked components is in the name itself – a long-term mindset.
Capturing big gains – which is key to beating the market over time – requires time. And with time comes patience. Long-term investors must be willing to buy great companies and hold onto them for years.
Longtime readers know that stocks never go up in a straight line. There are bear markets, recessions, missed earnings, and many other outside factors that can impact an upward trajectory.
Over the weekend, this theme was front and center as I reviewed a list of the top performing stocks over the last 15 and 20 years. Two emotions were triggered – pride and disappointment.
I felt pride because I was able to identify a few of those biggest winners before most of my peers. But I felt disappointment because several stocks got away – positions that I owned or recommended and then sold way too early.
The seventh best-performing stock in the S&P 500 over the last 20 years was one of those that got away…
Intuitive Surgical (ISRG) has gained nearly 14,000% in that time. Put another way, a $10,000 investment in the stock 20 years ago would be worth about $1.4 million today!
My question is how many people – outside of those directly connected to the company – bought 20 years ago and never sold? My guess is very few…
As you can see in the chart below, there have been several instances where Intuitive Surgical pulled back at least 35%. In 2009, the stock lost more than 75% of its value.
It’s not easy to hold on through such a drawdown. But clearly, it can pay off.
Before I leave you, I want to share a quick story about patience – or lack thereof…
Back in 2004, I was managing money with my newly formed investment advisor – Penn Financial Group. I only had a few clients at the time, and I bought shares of Intuitive Surgical for them at around $2 per share (split adjusted).
The stock went up about 40% in short order, so I decided to sell. I thought I was a genius. And sure, it was a solid return at the time. But the stock now trades at $544 per share.
Holding on would have resulted in potentially life-changing profits.
So when you’re buying stocks today for the long term, consider these questions…
How will you react if a stock pulls back 35% or more?
What if you lost half your original investment? Could you stomach holding on because you believe in the long-term story behind the company?
These are important questions you should answer before buying a new stock. Because if the stock does pull back 35%, your decision-making process will be driven by emotions – and those emotions could leave you with a big loss or huge regret if you exit a stock too early.
As we get closer to 2025 and you start thinking of New Year’s resolutions, remember to add “practice patience” to the list.
Here’s to the future,
Matt McCallEditor, Market Insights
The post Patience Pays: The Power of Long-Term Investing appeared first on Centurion Publishing.
