In a remote mountain valley near Princeton BC, we spent many hot summer days as a family fishing and camping at a small creek which was practically choked with millions of lively little trout. We called it Summer creek. The fish were so abundant they would often bite a bare hook, although they preferred a juicy worm from the area's fertile valley soils. It was the perfect location for young boys to learn the joys of having a wiggly pan fryer at the end of a fishing line.
Shading our favorite camp site by the creek side was a smallish, treed mountain. As a 15-year-old, a friend and I decided to challenge that mountain to begin our day one August morning. The rule for our fishing trips was that if the boys thought they knew a better place to fish then that's where we went. Dreaming of a remote mountainous lake, hopefully teeming with bigger trout, we set off.
Dad decided to sit this one out. Wimp.
Our supplies consisted of a handful of worms in a paper bag with some dirt, fishing rods, and an apple each.
After about forty-five minutes up the little mountain we realized that what had appeared to be the peak was actually just the beginning of a series of peaks. The heat sweltered on us but we continued our climb, egged on by our dream of an undiscovered fishing paradise.
Two or three hours into the journey we realized that every additional hill had another one behind it.
Our food was long-since consumed. Other than gravity, we had little idea where we had taken ourselves. Dad was looking smarter. We marched back, humbled by the relentless ups and downs of the terrain.
We might have eventually found the summit, and a vantage point to some sort of fishing spot, but we decided that the summit was beyond our budgeted time and preparation. As we turned around, the downhill phase brightened our spirits and quickened our march to camp. Missing our approach by a few hundred metres, we walked the flat stumpy field which approached the campsite. Hearing the familiar screech of an eagle, we looked up, noting the majestic bird in flight, circling its prey from its skyward vantage point. We watch jealously as the bird easily glided above our desired peak, then circled methodically over its lunch, drifting terrestrially until it swooped not far from us, pouncing on a small rodent with spectacular efficiency.
Unlike the eagles that soar, we can easily be restricted by our limited vision in stock markets. Ups and downs can be frustrating. We sometimes want to turn tail and head off the risk mountain entirely.
A bird of prey investor in any light, Warren Buffet experienced similar lessons in his youth. At eleven years old, he purchased three units of Cities Service Preferred shares at $38 per share for both himself and his older sister. Shortly after buying the stock, it fell to just over $27 per share. Buffet was gravely disappointed, but managed to hold on to his shares until they rebounded to $40. Then he promptly sold them - a mistake he would soon come to regret. Cities Service shot up to $200. The experience taught him one of the most basic tenets of investing: patience.
Thus, stick-to-itiveness and a long-term point of view are even more important than training. "You don't need to be a rocket scientist," quipped Buffet. "Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ...When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
Likewise, the ups and downs of equities are not for everyone. For some it simply is not in their nature to withstand the volatility. For others, say someone who is facing a forthcoming cash need, or who is at a period in their life when patience is literally impractical, their time frame requires more stability and they can't afford to wait for the valleys to become peaks again.
Mark Ryan is an advisor in Prince George with RBC Wealth Management, Dominion Securities, and can be reached at [email protected].
