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Warren Buffett's first-ever stock purchase illustrates two very important principles of successful investing strategies: patience and the importance of timing,

At the ripe old age of 11, Warren Buffett went into the stock trading business with his sister, Doris, buying six shares of Cities Service, an oil service company, at $38 a share. Buffett had identified Cities as an undervalued stock and was confident of making a nice profit for himself and his sister. Unfortunately, the stock lost almost a third of its value within just a few weeks of Buffet purchasing it. Despite his sister haranguing him continually about their dwindling fortune, Warren held onto the stock until it rebounded to $40 a share, when he closed the trade for a $2 per share profit. He then had the unpleasant experience of watching the stock rise to over $200 a share without him.

Buffett's experience is a good example of the importance of timing in investments. Another legendary stock trader, Jesse Livermore, stressed the point that it is nearly as important for an investor to be right in his timing as it is for him to be correct in his directional forecast. A stock may indeed be going to advance from $50 to $100 a share, but time and again investors have lost money buying it while it was first dipping down to $20 a share, only to then, like Buffett, watch it finally take off without them. Successful investing requires that traders be correct in their overall forecast for a stock and that they enter the market at the right time to realize a profit. Smart investors wait for market action to confirm their investment hypothesis before entering a position.

Patience is indeed a virtue for investors. Buffett exercised patience well in waiting for the market to come back in his favor, but he failed to be patient enough to take full advantage of the stock's profit potential. Having successfully weathered the storm, he failed to observe the adage, "Let profits run." Still, he did make a profit on his very first stock trade.

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