I remember when I first started investing. As soon as I bought a stock, I would constantly watch the stock price throughout the day, every day. Every tick it went up, every tick it went down. It was not healthy. Is there such a thing as being a stock market addict? It’s no wonder I decided to get into investing full-time. But enough about why I need to see a therapist. This is about how gardening can make you a better investor, because gardening teaches patience. And the most successful type of investor is the patient investor. If you’re not patient, then you’re not an investor; you’re a trader.
You Have No Control Over the Market
As much fun as it is to watch the stock market, especially when your stocks are going up, you need to remember that you have no control over the market. Watching the market move up and down does absolutely nothing to make you money. If anything, it hurts you from making money because you’re wasting time watching the market instead of looking for new investments.
You Can’t React Fast Enough Anyways
Sometimes, news will come out that can move your stock. If you’re not a full-time investor, you’ll be too late to capitalize on it. Even if you’re a full-time investor like me, it’s unlikely you can move fast enough to capture alpha because computers and other traders are following the news more closely.
The Market Isn’t Driven by Fundamentals in the Short-Term
Some days the market will go up, and some days it’ll go down. Sometimes your stock will move with the market and sometimes it’ll move in the opposite direction. Sometimes it’s because somebody is building a position in the stock, and sometimes it’s because somebody’s unwinding a position. The point is, a stock’s price movement in the short-term can be driven by many different things that have nothing to do with fundamentals. So if you don’t know what’s driving the stock on a daily basis, then why worry about it? To be an investor, you need look beyond these short-term moves and focus on the long-term.
How Gardening Teaches You to be a Patient Investor
I’m new to gardening. This is why I suck at it. But one thing that gardening has really taught me is that it requires constant work, and patience. A lot of patience.
Constant work because you need to keep watering the plants, weeding, and getting rid of pests. This is the same for investing. You don’t need to watch the share price every day, but you need to keep on top of your investments. Is your thesis still valid? Has new information come out that changes how you think about the stock? Are there other ways to analyze the company?
Gardening teaches patience because nothing grows in a day. It can take months, or years, depending on what you’re trying to grow. This is the same with investing. Since the daily price movements in a stock aren’t driven by fundamentals, it could take a long time for your thesis to play out. So don’t get frustrated if a stock moves against you in the short-term. If your thesis hasn’t changed and you still have conviction, short-term price moves could be a buying opportunity.