Investor Profiles by Level of Patience
“The stock market is a device for transferring money from the impatient to the patient”Warren Buffett
Our old pal Warren is right on the money. But as in everything else in life, there’s a nuance. In my experience, there are five different levels of patience:
— Very impatient: you open a trade. As soon as it goes against you, you close it.
— Impatient: You set a stop loss based on how much risk you can take. Sometimes you adjust the stop loss because you don’t want to close the trade in a loss.
— Somewhat patient: you set a stop loss based on your risk tolerance. You don’t adjust the stop loss based on your emotions.
— Patience Expert: you research a company extensively before buying its stock. You open your position and keep it open until you reach your profit goal or to reduce exposure. You consider closing your position in a loss only if there are fundamental changes in the company that force you to reconsider your position.
— Patience Master: you research a company extensively before buying its stock. You open a position and keep it open forever unless there are fundamental changes in the company that force you to reconsider your position.
Through education, but mostly experience, we can advance from the lower levels to the higher ones.
The Oracle of FI is a middle-class guy working as a software developer. His goal is to achieve full financial independence by the age of 40.
He started this blog in 2019 in order to share his tips and techniques on investing, saving money and making the most out of life.
He has a cat and lives in France.