Investing can be a bit like religion in that it requires a good dose of faith. When you buy into a company it could be years before you get any feedback on whether it was a good idea or not. In the mean time you just have to kneel before a picture of Ben Graham and say "I believe" before you go to bed each night. The same goes for the portfolio as a whole where you might under perform a simple stock/bond split for what seems like an eternity.
As well as faith and patience, it also helps if you get your kicks somewhere other than the stock market. Or, if you really want to get your kicks from your investments then perhaps take up day trading. Put bluntly, the market can move sideways longer than you can stand the inaction (see 2010 for a good example).
Value investing as I practice it seems to sit rather uncomfortably in the middle of the active/passive continuum. At one end you have passive indexing, where you don't do anything at all for huge stretches of time and frankly don't give a damn. Once a year or so you get out of bed and rebalance and that's about it. At the other end you have day trading, or variations thereof. Here you get to trade a lot, every day. If you close your positions at the end of the day you see your realised profit and loss each day which is a nice time scale for feedback.
The old school value investor has neither of these pleasures. You just get to sit and watch, in my case once a week, watching the prices go up and down and up and down again. Occasionally a dividend drops in which livens things up a bit. Months may tick by (in the last year I've bought into four new companies) in which nothing happens. Your faith will be tested by the grinding inactivity of it all and only the patient will stick with the game plan.
Value investing is not hard. It is not complicated. It is out there for all to see and should have long ago been vaporised by the efficient market. But it is beyond dull for most people and that dullness is an effective barrier to entry. That barrier is high enough to require a premium before anyone will do it,…
