As participants in the investment community, we watch and listen to some of the biggest and brightest stars talk about how they achieved great wealth for themselves and their clients. We read books and study methods and strategies that make them successful. We want to emulate the best of the best.
But are we really paying attention to what moves someone from good to great? It isn't easy to make that transition and often requires something extra, or something others are not willing to do.
In the case of investing, I have witnessed firsthand some of the finest money managers on the planet. Among their keys to success: Patience and good timing. These two are most important qualities of the best institutional money managers.
Now, why do I care about the habits of big money managers? This is where the action is, and I want to emulate the ones who deliver for their clients.
Patience is one of the hardest in this business. We want results now, but sometimes the market is not going to accommodate your time frame for winning. However, if you have a longer time horizon your odds for success greatly increase.
Think about how wealth was created just after the turn of the 20th century. New businesses came into view, and there was certainly risk associated with these upstart companies, such as Ford Motor Co. (F) , Coca-Cola Co. (KO) , IBM Corp. (IBM) and even General Electric Co. (GE) .
Yet, those investors who bought in and waited were rewarded handsomely for taking risk. The most patient investor of them all, Warren Buffett, has amassed enormous wealth by being patient. He buys companies that he plans to hold forever. I don't know of anyone who can be more patient than waiting forever!
Good timing is a function of being alert and ready for opportunity. For the last couple years we have had very few market drops, but most of them have been good buying chances. When volatility is low or remains low, as it is currently, there is a huge rush to buy dips. If you have dry powder (always have some) and are prepared when a dip happens and conditions are ripe, then like a big money manager you step in and buy.
The Great Recession taught us many lessons, among them to ignore the noise from the TEOTWAWKI (the end of the world as we know it) crowd and take advantage of the panic and fear often seen in the short term but absent in the long term. The big money bought that huge dip, and 10 years later it is still paying off.