Practicing the Art of Patience 153important distinction and thus view the stock market only for what
it is: a forum to acquire ownership interests in undervalued compa-
nies or dispose of those securities at fairly valued prices. Aside from
these two purposes, value investors are content to sit still and wait
until the market serves up prices conducive to their liking. When
there are no bargains, patience is bliss to value investors.
The stock markets, especially the U.S. markets, have arguably
been one of the most successful wealth - creating machines on the
planet, besting returns of all other asset classes over the long haul.
Unfortunately, the unmatched wealth creation created by the stock
market over the decades also leads to crippling wealth destruction.
Investors fail to see the markets for what they truly are — creators of
long - term wealth — and instead conclude that simply being invested
in the stock market, regardless of the general level of valuation,
automatically creates wealth. This thinking is a tragic mistake,
and it ’ s the source of much investor anger toward stocks. When
the mood is jubilant, folks are glad to put money in stocks, often
at overvalued prices. When the market is fi lled with euphoria and
stocks are expensive, the fi nancial world tells you what a wonderful
place the market is for your hard - earned money. Many investors are
made to feel stupid from all angles by not participating. Some will
get lucky and happen to get in and out having made great sums
of money. Those outlier success stories are the ones you will read
on the front page of the paper. For the majority, the end result is
substantial loss of capital and a permanent detachment from stocks.
When you participate in the market as a gambler and not an inves-
tor, why should you expect results any different from what you
would expect at a roulette wheel?
The independent - minded value investor, however, observes this
euphoria and sits still while the market is consumed with speculative
activity and overvalued securities. Value investors realize that some-
times doing nothing is the best thing you can do. The possibility of
earning quick returns is of no concern when it comes alongside a
heightened risk of permanent capital loss. Instead, value investorsCH008.indd 153CH008.indd 153 9/2/09 11:48:54 AM9/2/09 11:48:54 AM