In Pooh’s Little Instruction Book Piglet comments, "Don’t underestimate the value of Doing Nothing." Investors should heed his advice.
Of the many temptations in investing, the temptation to act too soon is among the worst. If something unexpected happens, people want to know what what you are doing about it–as if your doing something will change the underlying problem. By contrast, if something expected happens, it is inviting to execute your plan right away, even though it is likely that the best values will be had down the road a ways.
In this way, investing is a lot like baseball. Ted Williams used to comment that he would divide the strike zone into 77 different cells, each the size of a ball. He would then only swing at the pitches that were in his favorite cells–the ones he knew he could hit. If a ball didn’t enter his sweet spot he would simply wait for the next one. His patience helped him build a career .344 batting average over 20-years.
Consider the recent crisis in Europe: many investors thought that the crisis was the beginning of the end of the Euro. But now that the French and German governments have come up with a plan to recapitalize their banks, stocks have rallied and the pessimists are trying to rationalize their positions. Folks who sold during the panic are coming up short.
Piglet was right: it’s easy to underestimate the value of doing nothing. Waiting can be uncomfortable–but it’s not as uncomfortable as doing something dumb.
Douglas R. Tengdin, CFA
Chief Investment Officer
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