Sit tight

After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.

The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight. Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this you must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps! Wait until you see or if you prefer, until you think you see the turn of the market; the beginning of a reversal of general conditions. You have to use your brains and your vision to do this; otherwise my advice would be as idiotic as to tell you to buy cheap and sell dear. One of the most helpful things that anybody can learn is to give up trying to catch the last eighth or the first. These two are the most expensive eighths in the world. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.

From Edwin Lefevre – Reminiscences of a Stock Operator – based on the life of Jesse Lauriston Livermore (July 26, 1877 — November 28, 1940), also known as the Boy Plunger and “Great Bear of Wall Street”, was an early 20th century stock trader. He made his first 1000 at 15 and 10000 at 20 by starting with only a handful of spared dollars from his stock ticker writing job and trading at bucket shops, from where he was forbidden access due to his persistent success. He was famed for making and losing several multi-million dollar fortunes and short selling during the stock market crashes in 1907 and 1929 making a 100 million dollars in the great crash.

About jrv

I was born in Spain and lived in Belgium, Chile, France, USA, Argentina among other places. Currently I am trying to settle down in a wild place. I am "retired", even though now I dedicate more hours "working" for my investments than I ever worked in the real labor market where I used to work in IT and Banking. I am a family man, I have a lovely wife, several sons and one step daughter. I have humble tastes, I like to stay home and read about companies and investments. I started investing at 25 before the internet bubble exploded. I did not know much about investing and liked technical analysis so my results were pretty bad. Fortunately I did not have much to lose. Some years later in 2006 bored of doing only real state investments and with quite a lot of money saved I opened an account in a cheap and excellent online broker and started again. This time I did not want to commit the same mistake, so I decided to follow a model. I heard that Warren Buffett was the best at making money via stocks so I started by reading a lot about him, all of his shareholders letters and several of the books that he recommended. I learned a lot, started applying his investing principles and reading a lot of 10K's. Digested news from lots of different sources. Basically I started buying very good and cheap companies and holding them for ever if possible and if nothing changed fundamentally. When the housing crisis started I was more than 75% cash. At that time I identified good companies at incredibly cheap prices so I invested most of my savings in stocks. In less than I year I doubled. By the second semester of 2009 I turned my software company into an investment vehicle and dedicated myself full time to it. My wife and I decided to change our lifestyle and moved from Belgium to the beach in a wild country. The goal was to keep fixed costs low in order to be able to live with a minimum 6-8% yearly return but specially to move away from the inhuman life of civilization and to have finally some peace and sunny weather to concentrate better on investing. Now I can think and study about companies 60 hours a week and I am doing great. I can finally do what I want full time and can proudly say that I have never been so happy, specially also with my just born 4th son, my other great kids and my sweet wife who supports me fully while I study most of the day and patiently wait for the opportunity to make a swing ! You can learn a bit more about my portfolio by viewing it at www.kuchita.com/view/sumo.php or you may learn more about me and my family by following the link "Author's site" from the menu above.
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8 Responses to Sit tight

  1. Wu-man says:

    Too bad jrv, at the beginning I thought you were saying you had made millions of dollars!

  2. jrv says:

    hahaha :), not yet… just starting, but I’m sure they’ll come

  3. Brad says:

    Good advice. Not to get emotional about stocks.

  4. Kainvest says:

    Wondering if you use technical indicators to help you determine when to weigh in and out. If so, what are the ones you like?
    thanks.

  5. jrv says:

    No I do not. I value the companies I like based on cash flows and earnings and qualitative characteristics such as management, competitiveness, pricing power, durability and availability of information. If my valuation is much lower than the market price I buy, usually in several times. I sell only if I find a better alternative in which to invest or if it becomes grossly overvalued using the same criteria or if conditions change, like for example management starts to screw up big time or competitiveness is lost.

    I spend much more time studying qualitative information and the business itself than the financial information because I think that financials are the easy part and an outcome of the business quality and what drives the future performance is the quality and the valuation in comparison the the market price.

    I do not use any technical analysis.

  6. Kainvest says:

    Not sure if you have studied IBM, but if you, what are your views on it from qualitative perspective?
    Note there is a major management change starting 1/1/2012 – Gini Rometty will succeed Sam as new CEO.
    thanks.

  7. jrv says:

    I studied it last year and it looked quite good but I did not feel comfortable enough with the price in order to buy and saw better opportunities so I never bought. I think its a good company and if you feel you really understand its business and are reassured that it will remain good its not a bad idea to buy, but I personally do not know it enough yet to buy it, maybe if it gets cheaper, meanwhile I am focusing on others.

  8. Julio says:

    jrv send me your E-Mail talk about Vix

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