In the 1960s, Stanford University conducted a now famous study that tested self-control using four-year-olds and marshmallows. Researchers gave kids a marshmallow and explained that they could either eat it immediately or receive another one if they waited for the researchers to return to the room. So the kids had to choose between an immediate reward or the greater but delayed gratification.
The researchers tracked these kids over the course of their lives and observed that the ones who held out for the second marshmallow continued to make better decisions. Their discipline and appreciation for delayed gratification resulted in fewer behavioral problems as children, better grades, lower instances of obesity and substance abuse, and overall greater success as adults in their chosen endeavors.
But in our current age, it is increasingly difficult to practice this type of discipline. Everything we experience is immediate—or at most requires two-day shipping. We are conditioned to expect immediate results as we receive a constant flow of dopamine throughout the day with each new notification on our phones. As a result, we expect the same type of immediate reward for all our actions, even investing.
Through apps like Robinhood and Stash, you can day-trade from your phone, and every time your stock moves, you get that same hit of dopamine. It even feels productive since you’re “investing,” but that’s not what you’re doing—you might as well pick a number on the roulette wheel in Vegas. Real investing takes time, and many people don’t have the patience for it.
Buffett famously doesn’t even have a computer in his office—he has no interest in tracking the day-to-day movements in his vast array of investments. Of course, it’s healthy to check in on your investments periodically, but in a news cycle where headlines change by the hour and markets react accordingly, nothing productive can materialize from your daily obsession.
You don’t create wealth from short-term bets. As much as we would all like to believe that we can hit the jackpot with that one trade, it just won’t happen. Investing takes discipline and an appreciate for the greater reward with delayed gratification.
Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@LeFleurFinancial.com.