Delayed Gratification or Compound Interest?
Two influential men you’ve heard about had something to say about that. Ideas that have ‘stuck’ through time.
I’m not influential but I too have some thoughts on the matter. While critical for success delayed gratification can be a double edged sword.
It’s a principle that can be learned early in life but most folks never do. There was a scientific study done with children where thay had the choice of an Oreo cookie now or wait and see if another one showed up later Guess which side won?
Sure, like most, we’d enjoy that Oreo right now. Kids aren’t stupid. Gimme that cookie NOW. Some waited and got two but the majority in the study wolfed that cookie down pretty quick. A test with marshmallows yielded similar results.
In my little world I can recall heading to the local store one of which always seems to be located right near a school. In that store there were a couple of pinball machines. My buds would spend their lunch money by plugging the machines with coins. Only to see ‘TILT’ on the screen sooner than later.
I wasn’t a purist and spent my little stipend on candy. But I do remember thinking to myself… jeez they got nothing for their money. I won’t do THAT! But I was happy to buy some sweets and a Coke! I also had a goal of buying and building a model car. Had my eye on a 57 Chevy kit. I didn’t have a clue I was learning delayed gratification. Stuck with me my entire life.
The same thing happens when kids go to a movie. Unless taught otherwise, they spend whatever they have in their pocket. I always left with money in my pocket. And who in their right mind would buy a bottle of water at a theatre to wash down the popcorn?
So as an adult, and especially a speculator or trader, you have to be ready to build account equity. That might fly in the face of your life experience.
The flip side of this coin is become miserly holding on to earnings and not getting the enjoyment out of your effort. As I age, I’m reminded “you can’t take it with you” rings true.
Here’s some perspective. Trust me, it’s VERY gratifying to get a cheque from your broker showing your earnings (winnings) in a tangible payment back to YOU! But my system of delayed gratification on balance works wonders to capitalize on the ‘compounding’ effect of money.
If we accept the phase from Ben Franklin “Money makes money. And the money that makes money, makes money,” as true, then seek a balanced approach to withdrawals from your trading account. Especially because like NO other system of leverage, compounding your margin is the best deal in town.
While that means delayed gratification, the compounding effect is like no other. A balanced approach I use is to allow your account to double. Then withdraw your original seed money if you can use it elsewhere. That way you use the excess margin to leverage multiple contracts into a winning position. Your money that’s making money will make money. Of course you can leave everything alone but the danger in that is your seed doesn’t get returned in a timely manner. Too much delay can foster greed. No sense being successful but miserly. Pull out enough money to feel free but not enough to reduce opportunity.