This approach runs counter to the modern investor's obsession with liquidity and the constant monitoring of portfolio values. While the ability to easily buy and sell stocks can be advantageous, it can also enable destructive short-term trading behavior. The savvy long-term investor recognizes that true wealth is created by treating public holdings as if they were private, focusing on the underlying business fundamentals rather than daily price movements.

Of course, resisting the urge to act on short-term market noise is easier said than done. When stocks are soaring, it's tempting to cash out and lock in profits, forgetting that the biggest fortunes are often built by holding on to exceptional companies for decades. Conversely, during market downturns, the instinct is to sell and minimize losses, rather than seeing the opportunity to buy quality assets at discounted prices.

To cultivate a mentality of patient inaction, investors must consciously tune out the constant chatter of market forecasters and pundits. This may involve deleting portfolio tracking apps, avoiding financial news networks, and even taking periodic breaks from checking investment accounts altogether. For those with a well-defined circle of competence, the appropriate response to short-term volatility is often to do nothing, while periodically reassessing the long-term prospects of each holding.

One notable example of the power of patience in investing is the story of Nick Sleep and Qais Zakaria, managers of the Nomad Investment Partnership from 2001 to 2013. By focusing on a concentrated portfolio of high-quality businesses and holding those positions for the long term, Sleep and Zakaria achieved annualized returns of over 20% during their tenure, handily outperforming the broader market. Their success was built not on frenetic trading, but on the willingness to patiently hold on to great companies like Costco and Amazon through both good times and bad.

Admittedly, there are situations where action may be warranted, such as when a company's fundamental business prospects have materially deteriorated. However, for the majority of investors, the greatest challenge is not identifying the right stocks to buy, but having the discipline to hold on to those stocks through the inevitable ups and downs of the market.

In a world obsessed with instant gratification and short-term results, the ability to do nothing in the face of market volatility is a rare and valuable skill. By cultivating a mentality of patient inaction and focusing on the long-term prospects of high-quality businesses, investors can harness the power of compounding and build substantial wealth over time.

As Jim Rogers put it,

One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do