Patience in Investing 101

As we endeavor upon a new school year, I was reminded by my ever outspoken six-year old of the trials and travails that come with working towards a meaningful goal. You see, he is making the giant leap from half-day Kindergarten to a full day in first grade – a big step, mind you.  After his first week of class, I asked him what he thought his favorite subject would be for the year.

He didn’t exactly dodge the question, but expertly changed the subject.  Leaning forward towards me while sitting at the kitchen counter, he said, “Dad, school doesn’t really suit me.  It’s not really my thing.”

Shocked that he knew how to use the term “suit me” in the proper context, I tried to dig further. “School doesn’t suit you, buddy?, I asked.  “What does suit you then?”

Without hesitation or any sense of guilt whatsoever, he told me playing Pokemon and watching movies was more his style.  “Dad”, he said, “school just takes too long.”

In all honesty, I remember feeling the same way when I was his age.  Still do sometimes.  Let’s face it, doing things that are meaningful and worthwhile are often hard, slow, and risky.  We sometimes get discouraged with our pace of success and doubt whether or not we are on the right course.

I think this is a key issue when it comes to our own financial and investment plans.  One person wants to feel like they could afford to retire – now, not in the seemingly far away future.  Another person wants to be able to pay for their children’s college education, but time is closing in on that bill coming due and they don’t know how they can save fast enough to be able to fulfill that personal goal.

The scenarios where I see this in my daily work as a financial planner are endless.  In all fairness, I sense this in my own planning and investment decisions as well.  The issue is one of the most common sources of our financial mistakes.

That issue is impatience.

The ability to see through shorter term obstacles and keep one’s eye on the longer term development of an investment thesis is one of the main things which separate investors from traders.  While there should always be an honest, ongoing assessment of the efficacy of a strategic allocation or individual investment, avoiding short term reactions is of paramount importance.

We need patience.

Even more importantly, as we assess the larger picture of our financial lives – where we express our deepest held values and the specific goals that come from them – patience is one of the key behavioral attributes which makes us successful over time.  If the purpose for which we are working, saving, and investing is truly a DNA level endeavor, we absolutely have to find the perseverance to see it through.

As I have been thinking a lot through these behavioral attributes in my unique role as a financial advisor and walking through these conversations together with you, I am more and more convinced that our behavior is the most important factor determining our success.  While we largely hear of behaviors to avoid, I think we also need to balance out those cautionary tales with a stronger emphasis on the behaviors which will guide us along the way.

For example, one of my favorite authors, Angela Duckworth, champions what she calls “grit,” which carries the idea of using your passion to power your perseverance through the obstacles you face to the ultimate goal you have set for yourself.  More on her seminal work can be found through this link:

That said, we do hear a lot of wisdom from the behavioral finance folks whose goals revolve around identifying, explaining, and then advising the rest of us on the behaviors we are to avoid.

For example, one of the “cognitive biases” we hear much about, from the coining of the term by Daniel Kahnemann in 1979 to today, is that of overconfidence.  Not to disparage the ground breaking work of Dr. Kahnemann (or Amos Tversky, Richard Thaler, and many others), but what about taking the positive side of that idea?

Instead or trying to avoid being overconfident, look at the value of humility in investing.  I recently placed an article in Money, Inc. regarding this subject and got some great and interesting feedback.

Related to that broader construct is the idea of patience in investing and planning.  This may counter the Recency Bias, for example, where we have a tendency to build our outlook on what we have most recently experienced.  Instead of viewing the investments we have as suspect because the market suffered through a correction or simply a tough week, we have the patience to look beyond that recent experience using a disciplined and thoughtful view of what our financial plan requires from the portfolio, how the portfolio was constructed, and an honest assessment of its prospects going forward.

For an example of this, we can go back to 2015 when one of the big concerns our investment team had was the narrow participation individual stocks had in the returns of the S&P 500.  If you took out the top ten performing stocks of that index, the landscape of the broad investment environment did not look healthy.

The top ten performing stocks of the S&P 500 made up 208.8% of the index’s performance. This means other stocks (in composite) had lost value or were flat compared to these ten companies.

At the time, the team thought the largely positive economic backdrop would allow opportunities for more companies to participate in this growth – and by mid-2017, it has.  But it took patience.

So as we get kids back to school and we look with intention at the Fall through to the end of the year, allow me to encourage you to exercise patience in your planning and investment endeavors.  I am always here for you as you have questions, concerns, or needed clarifications and will look forward to our next conversation.

While patience may not always “suit you,” it will be worthwhile in the end.


About Michael McGrath: Michael McGrath, MS, CFP®, CLU® is a vice-president with EP Wealth Advisors. Mr. McGrath graduated from Pepperdine University in 1994 and received his Masters of Science in Finance with an emphasis in Financial Planning from The College for Financial Planning. Active in his home community of Santa Clarita, California, McGrath was elected to the Newhall School District Board of Trustees and has served as an adjunct faculty member at The Master’s College in Newhall, Calif.  Michael and his wife, Shelley, have been married since 1992 and have five children, Garrett, Brody, Alleah, Collette, and Griffin.

About EP Wealth Advisors: EP Wealth Advisors is a fee-only registered investment advisory and financial planning firm headquartered in Torrance, California. EP Wealth Advisors manages more than $2.9 billion for clients as of June 30, 2016. With additional offices in the San Francisco Bay area, West Los Angeles, Irvine, California and Denver, Colorado, the firm provides client-centric financial planning, wealth management and investment management services to individuals and businesses. EP Wealth was listed among the Top RIA Firms in 2015 by Financial Advisor magazine and in 2016 by Financial Planning magazine (This ranking is based on a firm’s assets under management as reported on Form ADV. Firms eligible for this ranking must be independent registered investment advisors providing services to individual clients with at least 50 million in assets under management as of December 31, 2015. Our presence in these rankings should not be construed as an endorsement of the advisor by any client nor is it representative of any one client’s evaluation or opinion of the advisor. Third-party rankings are no guarantee of future investment success. Working with a ranked adviser does not ensure that you will experience a higher level of performance or results.). For more information, visit:

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