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Ankesh Kothari <[email protected]>
Sun, Mar 28 at 12:59 PM
Strategy + Story telling = ZenStrategies.com
In today's email, Ankesh Kothari's newsletter:
Namaste Jay Alexander
Thank you for knowing that good things can take time.
Which investors earn the most returns?
Would you know what type of investor earned the best returns between 2003 and 2013?
No really. When Fidelity Investments performed their internal audit, they found that accounts that were completely dormant with no new activity were the ones that generated some of the best returns! These could be accounts where people had literally died and the estate hadn’t done much, or where the courts had freezed the assets, or where people had moved jobs and had forgotten about their old 401k or pension investment accounts.
Why would dormant accounts end up earning more money? Because they didn’t interfere with success. They didn’t second guess their investments. They didn’t sell and incur losses when the market was red. They waited... patiently.
And as legendary investor Warren Buffet says, “The stock market is a device for transferring money from the impatient to the patient!”
Ask most people and they’ll say that real estate is a great investment. A Gallup poll in 2014 showed that people rated real estate as a better investment than stocks, gold, bonds, and commodities. But if you track the records, housing prices have barely kept pace with inflation in most parts of the world!
Equity has done better than real estate. And yet, more people have made money with real estate than equity investments. How come? Morgan Housel explains: “Housing isn’t a great investment. But for most people it’s their best investment because it’s the only asset they’ll leave alone and let compound for 20-30 years!”
The famous Marshmallow experiment
Walter Mischel, a professor from Stanford conducted an experiment on 3-5 year old kids. These kids were presented with a tempting marshmallow. And were told that they could eat this marshmallow right away. But if they waited 15 minutes before eating it, then they would get one extra marshmallow! They could have one marshmallow immediately, or two marshmallows after waiting in an empty room showing they had patience and self control!
The interesting thing was that Mischel followed up with the kids after 16 years of the experiment. And found that the ones that had delayed gratification and waited to eat two marshmallows had better SAT scores, and had better paying jobs!
Patience is key not only with investments. But also with getting more educated to earning more money!
So how can you become more patient?
We first have to ask ourselves when do we lose our patience? We lose our patience when we realize our goal is going to cost us more than expected!
We become impatient when we can’t accept delays, difficulties, annoyances, and boredom!
Mary Jane Ryan, author of Power of Patience, says that impatience is an emotion. And it falls on the anger spectrum: it starts with irritation, moves on to annoyance, and finally full blown rage!
You have to temper your aggressive impulse to become more patient! How can you do that?
4 tactics to cultivate patience
It starts with awareness. Try to become aware of what impatience feels like to you, and what triggers impatience in you. Daniel Goleman, who writes on brain and behavioral science talks about how when you become aware, the activity shifts from the limbic system of emotions to the prefrontal cortex of logical thinking where the intensity of your reactions can be reduced. Zen monks are the epitome of patience because they constantly strive to live in a state of awareness!
Retempering your goals and expectations. Impatience occurs from impedance to goals. If you can recalibrate your goals, and how long they should take, impatience will go away. As celebrated author Elif Shafak writes: “The lovers of God never run out of patience, for they know that time is needed for the crescent moon to turn full.”
Encourage waiting. Dr Harvey Karp shares a nifty trick to teach patience to toddlers. He says that while doing tasks for toddlers like giving them juice, make them wait for 5-10 seconds. And then encourage them: “Good waiting!” When they feel that waiting is good and get rewarded for it, their waiting muscles will grow. Their patience will grow!
Patience is not about waiting. It's about what you do while waiting. Do you remember the kids in the marshmallow experiment who had to wait 15 minutes for an extra marshmallow? The kids who were successful in waiting out were good at distracting themselves! Instead of looking at the marshmallow right in front of them, they would look elsewhere, start singing, or playacting. One child even looked up at the ceiling and started praying! People who can master self distraction can master patience! A healthy distraction habit is to always have an interesting book by your side!
Patience is key to let good things compound. Don’t interfere with success.
Impatience stems from anger. The only way to deal with it is to start with awareness, and then build up your waiting game.
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