What School Taught You About One of the Greatest Challenges in Investing
The future seems far off, but you've already lived and learned from this once.
If you want to have enough money down the road for retirement (or whatever) you have to make a decision to invest some money now that you could otherwise use to buy other stuff now.
As a background, you might want to read or revisit our posts: Decisions, Decisions (Core Post No 1) and Why Context Matters (Core Post No 2).
This delayed gratification, as it’s called, is one of the greatest mental challenges for the long-term investor.
It helps if you can imagine your future self thanking you for making smart decisions when you were younger.
Your School Years
As challenging as this is, it helps to know that you’ve already had at least one down-the-road moment. And you can learn from that experience.
When you walked through the door at your middle school for the first time, you were not likely thinking about life after high school. That was way too far in the future.
Yet, your six-year journey to that point will have largely determined the options available to you for your next chapter in life.
Were you going to go to college? To trade school? The military? Immediately enter the workforce? And so on.
When you’re in school, your “job” is school. There are at least three different ways you can approach it:
Don’t take it seriously.
Put in effort to get the best grades possible (Achievement).
Work to understand what you’re being taught (Accomplishment).
If you don’t take school seriously, you face the consequences of fewer options when you conclude your high school career.
As for the difference between Achievement and Accomplishment, we cover those in our post: Start Here: The Payoff for Reading this Substack.
Sure, getting good grades will keep many options open, but this can only get you so far. On the other hand, understanding (Accomplishment) leads to knowledge, which can help you throughout your life.
And school isn’t just about grades. Your choices for extracurricular activities can affect the options available to you as well.
So, looking back, would you have done anything differently?
What has this taught you about making future down-the-road decisions?
Long-term Investing—The Payoff
We’ve talked many times about how the Secret to Investing is Compounding and the Most Important Factor in Investing is Time.
Because of Compounding, even small regular investments (like you make in a 401(k) plan) can grow to a meaningful nest egg, given enough Time.
In order to trust the process, however, you need sufficient knowledge about how investing works. It’s what we call Financial Mastery—the ability to make smart financial decisions automatically.
One of the more common regrets we hear from people approaching or in retirement is that they never learned about the power of compounding and put off the start of their investment journey because the payoff seemed too far in the future.
If there’s a message you can take away from your school years, it’s that the journey to get wherever you’re going constantly opens—or shuts—doors based on decisions you make in the moment. Once you understand and trust the process, there is an immediate payoff for knowing the decisions you’re making now will reward you down the road.
Your future self will thank you.
Best regards,
Stuart & Sharon