All three possessed exceptional analytical skills and a deep understanding of value investing principles. Yet most people have only heard of the first two. Buffett once said when markets crashed nearly 70% in 1973-74, Guerin, who had borrowed heavily to invest in equity, faced devastating margin calls. This forced him to sell his Berkshire Hathaway shares to Buffett for less than $40 each. Those shares are worth about $740,000 today, making this one of history’s most expensive lessons in patience.
The power of compounding
The mathematical magic of compounding represents perhaps the strongest argument in favour of patience in investing. Compound interest is the “eighth wonder of the world”, according to a quote popularly (but perhaps incorrectly) attributed to Albert Einstein. Even if the attribution is incorrect, though, the point stands.
Compound interest is what allows investments to grow exponentially, but its true magic only materialises over long periods of time. An investment that’s growing at an average annual return of 8% will double approximately every nine years, but over two decades or more, the same investment could multiply several times over. This exponential growth explains why investors who remain patient often achieve dramatically better results than those who frequently enter and exit positions.
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The snowball effect of compounding is silent but powerful, transforming modest investments into substantial wealth over time. For instance, ₹10,000 invested with an average annual return of 7% would grow to about ₹20,000 in 10 years. But if allowed to compound for 30 years, it would balloon to ₹76,000. This shows why patience isn’t merely a virtue in investing — it’s essential to building wealth.
Leverage is a double-edged sword
Financial markets naturally fluctuate owing to economic events, geopolitical developments, and changes in investor sentiment. Without patience, these natural market rhythms can trigger emotional decision-making, including panic selling during downturns or chasing overpriced assets during bull runs. Adding leverage to to mix when investing in volatile assets can increase your returns when the bet works in your favour, but will wipe you out quickly if it doesn’t.
Benjamin Graham said it best: “In the short run, the market is a voting machine but in the long run, it is a weighing machine”. By being patient and resisting the urge to invest using leverage, you can avoid costly mistakes that compound negatively over time. Those who use leverage don’t have an option but to sell at loss during downturns, so it’s best avoided.
Psychological discipline of successful investing
Success in investing depends as much on discipline as on analytical skill. Patience is the cornerstone of emotional discipline and crucial for achieving exceptional long-term results. Fear and greed represent powerful forces that can derail even the most sophisticated investment strategy. Patient investors develop the capacity to resist these emotional triggers, making decisions based on fundamental value rather than market sentiment.
This psychological discipline manifests in several ways. Patient investors avoid checking their portfolios obsessively as they understand that daily fluctuations have little bearing on long-term performance. They stick to their investment strategy rather than chasing the latest fad. Perhaps most importantly, they recognise that investing excellence comes from temperament rather than intelligence — specifically, the ability to remain calm and focused while others panic.
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Patient investing serves as a reliable method for accumulating wealth steadily and achieving financial security. By consistently contributing to a well-diversified portfolio, investors can work toward meeting their long-term objectives, whether retirement, buying a home, or funding a child’s education.
Long-term investing also offers significant tax advantages, as holding investments for more than a year results in lower capital-gains tax. This tax further amplifies returns for patient investors, providing another powerful incentive to take a long-term view.
Slow and steady wins the race
Guerin’s story serves as a reminder of how impatience (and leverage) can derail even the most promising investment career. While he still achieved reasonable financial success, his name gradually faded from the investment world while Buffett and Munger became legends.
Buffett later explained the critical difference between them: “Charlie and I always knew we would become incredibly wealthy. We were not in a hurry. Rick was just as smart as us, but he was in a hurry.”
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The Oracle of Omaha also said, “If you’re even a slightly above-average investor who spends less than you earn, over a lifetime you cannot help but get very wealthy—if you are patient.” This shows that while you don’t have to be exceptionally intelligent to succeed in investing, discipline and patience are non-negotiable.
Abhishek Kumar is a registered investment advisor and founder of SahajMoney.
