A key factor in mastering delayed gratification is the ability to be patient. Charlie Munger, a key business partner of Warren Buffett, once remarked “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
This is indeed true in the world of investing. Most seasoned veterans would advise that the lack of patience causes many an investor to make mistakes. It is needed especially in sticking to the wisely calculated and planned strategy, instead of being over-reactive to market movements and news chatter.
The lure of instant profit is something not easy to deal with. We live in a world where we are conditioned to get things at the snap of our fingers. This is especially so when our society today is one with conveniences never possible a mere decade or two ago. From the food we eat, the services we use, and the multimedia we can command at demand, the norm of getting what we want, when we want it, has changed drastically by the power available at our fingertips today.
Every product shouts “Better! Faster! Now!” We are bombarded with the lure of rare and time-limited discounts, and investment opportunities that try to make you feel privileged and lucky. There are even some robo-advisories that claim they can beat the market. Are they really telling the truth, or could they be traps that take advantage of our impulsive tendencies to instant gratification? If we were to conscientiously take a step back and wisely consider, the math and statistics might tell a very different story. We need to do our research and investigate the facts, especially when some financial products promise returns that are too good to be true.
Before we go on, let’s give this quiz a go. They are of course hypothetical scenarios, so don’t try to think too much about them. Instead, go with your most natural choice and let’s see where that goes.
Were you surprised at your results? When you were attempting the quiz, did you consciously think about how much savings you could have accrued? Or was it more of an afterthought when you saw the results of the quiz? Now that you’ve taken to mind the power of compounding interest, would that be something that will affect your purchasing decisions henceforth?
Be sure to look out for our final part of this mini series as we tie everything together and discuss practical solutions to improving our financial decision making. Do remember to sign up for our mailing list if you haven’t already, so you won’t miss out on new content!
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