By: Connor Keller
A man found a cocoon of a butterfly. Shortly after, a small opening appeared. He sat and watched the butterfly for several hours as it struggled to force its body through that little hole. Then it seemed to stop making any progress. It appeared as if it had gotten as far as it could, and it could go no further.
So the man decided to help the butterfly. He took a pair of scissors and snipped off the remaining bit of the cocoon. The butterfly then emerged easily, but it had a swollen body and small, shriveled wings.
The man continued to watch the butterfly because he expected that, at any moment, the wings would enlarge and expand to be able to support the body, which would contract in time. Neither happened! In fact, the butterfly spent the rest of its life crawling around with a swollen body and shriveled wings. It never was able to fly.
It goes without saying that patience is a virtue. There are many aspects of our daily lives where having patience pays enormous dividends. I can think of numerous personal situations from parenting to friendships, and to driving, where being patient is important. As for investing, patience can help determine a positive outcome.
One of the most successful investors I knew had great patience. When he invested in land, equities or art, he was not concerned with the price tomorrow, or next month or next year. He understood the investment, and the value of the asset, and believed that the value would grow over time. By being patient, or not in a rush, he allowed his investments to compound and he created enormous wealth.
There are so many examples today of people trading stocks, or options or currencies, and making profits in a relatively short period of time. Good for them. I am more concerned with investing for the long term, and to be successful requires certain behavioral traits. Being patient is one of them.
Let’s look at Apple.1 If you bought the stock at the end of 1990, you would have paid 38 cents (split-adjusted) per share. In 1995, 1996, 1997, you experienced years where the stock was down 18%, 34%, and 37%, respectively. This downturn might have caused some to panic or sell. But in 1998 you were up 211%, in 1999 you were up 151%. If you held on to the stock, the price at the end of March 31, 2021, was $122.15 per share. Safe to say, your patience to hold on would have paid off. Now, let’s come back to the butterfly. This man did not demonstrate any patience and the result was disastrous. He was in a hurry to see the end result. Watching a butterfly emerge from his cocoon requires great patience. Simple research on Google shows that it takes anywhere from 5-21 days for a butterfly to emerge. Watching this process could in fact be somewhat boring. Imagine staring at this cocoon for two weeks, with no action. He could not stand the boredom and wanted to rush process.
This is a great example of how not to invest. We should not rush the process. We need to be patient. Sure, there is no “action” in that. We need to teach ourselves that sometimes doing nothing allows our investments to grow, or compound. With so many metrics thrown at us on a minute-by-minute basis, it is hard to not get caught up in the hype. However, be patient, be boring. Allow the trees to grow into a forest. Allow the butterfly to emerge from the cocoon. Allow your investments to compound. Ultimately, you will enjoy the benefits and reap the rewards, as patience pays dividends.
1 Data courtesy of Macrotrends.net
This content was originally published on wilmingtonbiz.com.