Why Does Charlie Munger Say: Waiting Is the Most Important Skill?

Waiting - can you believe patience is the most important trait for an investor? According to Charlie Munger, who is one of the most successful investors of all times, we should practise patience and excel in waiting.

And waiting starts right from the beginning. Once we've done our research and found a wonderful business or two, you'll find that there isn't really much to do because your valuation showed a stock price that's far from the current stock price (because we want to buy with a margin of safety in case we made any errors in our business case). Your valuation price is $50 and the stock sells for $150 - will it ever go down? Now the waiting starts. The waiting for the stock price to come down to a great price. Once the stock price is right, and we've bought the stock an even more difficult waiting period will come, where you might experience that your stocks go down (buy more) or stagnate for a while. Or go up. 

But we're not in it to sell. We hang on for the long run because of the compounding effect, because of taxes (when you don't sell you won't pay capital gains tax), you pay less in brokers fees, and you wont have to listen to all the noise and news about the stock market. Just focus on your wonderful businesses. It itches inn your fingers to hit the sell button. And this is where this important skill will help you. Be patient and see you money grow year on year. Carlie Munger calls it "sit on your ass investing"

Look at those hedge funds - you think they can wait? They don't know how to wait! In my personal portfolio, I have sat for years at a time, just waiting, waiting. As Jesse Livermore said: 'The big money is not in the buying or selling... but in the waiting'

Charlie Munger

Waiting is a passive process and waiting is not something that most of us are wired to do, especially in this age now with super speed internet and high paced life. How do you feel, when you se that spinning wheel while a website is loading? I can tell you I feel impatient after just a few seconds of waiting. We've been conditioned to take fast action so this will go against your normal pattern and it will take self-control and grit. Awareness is the first step and I hope that I've made you aware. Now comes practise and eventually action... or lack hereof. The difficult action of not taking action.

You don't make money when you buy stocks. And you don't make money when you sell stocks. You make money by waiting.

Mohnish Pabrai