Everyone that has made money on good investments probably has mastered the skill of delay gratification. What is delay gratification? This is a skill that everyone has and most everyone is aware they have it. Instead of getting over-excited about something, you learn to spread your gratification over a long period of time instead of indulging in at all at once.
A couple examples of delay gratification are a poker player and a smoker. The poker player has been able to tune their skills to focus on the big picture, which is the large cash prize they will eventually win with patience. A smoker on the other hand is an addict. They need the cigarette in order to function and they must have this instant gratification when they need it. Most people with addiction problems were never taught to delay gratification or they simply were unable to master this trait.
Even though you may be older, you still have the ability to learn delay gratification and your investment portfolio is a great place to start. In order for it to work properly, you need to create some goals that have rewards if you accomplish them. Think of an athlete that is trying to get the gold medal, and the gratification they have when they eventually get to it. In the process of getting the gold, they may have received some silver medals, bronze medals, or they may not have even placed in the tournament. The smaller rewards are a build-up for their ultimate goal which is to become a gold medalist. An investor has a similar plan; they want to make a nice profit off their investments. This profit may not make you a millionaire, but if you set some reasonable goals, you will be able to achieve them. So to teach yourself delay gratification you need to set up some rewards for small achievements; like a $10 profit on one of your low-risk stocks. The small rewards can help you get excited for your ultimate goal and therefore you are training yourself to have the skill of delay gratification.
The reason why smart investors need to have delay gratification is because people tend to get greedy. Take a look at your spending habits; do you spend almost every dollar you make? How much do you invest and how well do you manage your investments? If you have problems with your spending and you’re investing, you need to work hard at training yourself to have delay gratification. Here is a good example, let’s say you walk into Old Navy and they have a nice pair of pants on for $55. You told yourself you would only spend $30 on clothing but you really want the pants, what do you do? Option A says listen to the voice of reason and leave the pants, you don’t really need them and they will go on sell in a month anyhow. Option B says to heck with the extra $25, its not that much money and you really need these pants. People that follow option B need to go back to the drawing board and re-learn delay gratification. The truth is, most stores will discount their products in 3-4 weeks, so you will get the $55 pants for $30 or even less if you learn patience. Then you will get the same exciting feeling you had when you initially saw the pants to begin with.
The same is true with investments, when you wait on a stock, you will someday see it earn money. Don’t give up on it right away because it initially has a drop. If you have patience, you will see the stock climb again and you will end up making a decent profit from it.