When Wishing Beats Investing

This is the title of an article appearing on Page 22 of the November, 2006 edition of Smart Money: The Wall Street Journal Magazine. It reminds us of a fact which is known to most investors, but one which we tend to lose sight of - the fact that patience is a virtue - with a payoff.

Some of the best investors spend most of their time not buying stock. Instead, they isolate superior companies and study them day in and day out. Then, they wait. Eventually, a spike in oil prices or an earnings miss will drive the stock price down - only then do they buy.

"Everyone does the opposite," says Jeff Auxier of the Auxier Focus fund. "They focus on the ticks and let the market move them instead of letting the market serve them."

So what this tells us is the fact that if you want to develop into a superior investor, you should be creating a "wish list" of potentially good long-term holdings, and then wait and seek for situations like headwinds developing in the housing market or in consumer spending and the overall economy to increase the likelihood of short-term drops that can provide an opportunity to invest in candidates that you have been watching on your "wish List."

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