Kindling The FIRE: Asset Allocation Daily

Shutterstock photo

By SA For FAs :


Time Horizon

Value Stocks

Inflation And Commodities Prices

Target-Date Funds

Thought For The Day

In a comment on my article yesterday touching on " very early retirement " and the goals of the "FIRE" movement for financial independence, SA contributor Ian Bezek had this to say:

The above is a small excerpt of Bezek's comment; it'd be worthwhile to click here to read the whole thing.

In yesterday's post, I wrote critically of the idea of retiring in one's early 30s. Numerous respondents felt that I misunderstood the positive attributes of FIRE, and indeed they are apparent from Bezek's remark. And that leads me to today's topic - which is how to employ the key underlying strength of FIRE and use it to kindle the wicks of other investors.

Simply put, there is something exceptionally great about people who can save 50% of their income (leaving aside for now my criticism of somebody might take up a career in thumb twiddling once he's reached his financial goals). Very few people do that, or even come close. It takes tremendous discipline.

It puts me in mind of the famous marshmallow study in the 1960s by Stanford University psychologist Walter Mischel in which nursery school kids were offered a choice: They could have one marshmallow now, or wait alone for several minutes until the researcher returned to the room and get two marshmallows.

The study was conceived based on Mischel's observations of his own daughters. As small children, they had to have everything right away. But he noticed that once they turned four, suddenly each seemed to develop a capacity to wait a bit once told that what they wanted would eventually be forthcoming. Most of the kids observed by Mischel weren't blessed with his own daughters' patience. They wanted that marshmallow right away. Some followed the researcher's instruction that if they couldn't wait, they could ring a bell and it would be provided them; others just took it.

What the research uncovered next was rather extraordinary. Tracked over a period of decades, the kids who were able to defer gratification ended up becoming enormously more successful in life, with better grades in school, better SAT test scores, better relationships, better health, better jobs, higher incomes, you name it. What's more, they were apt to avoid the most negative outcomes of the single-marshmallow set, including jail time, obesity and drug use.

The folks Bezek cites who are "pretty serious" about building up their resources seem to be like the valedictorians of Mischel's marshmallow laboratory, and this deserves recognition. Here's my problem, though. I don't want to see anybody left out of this circle of virtue, if we can avoid it. Only 30% of Mischel's testers were able to wait 20 minutes for two marshmallows.

I do not know whether it was nature or nurture, or some combination, that gave them this early advantage in life, but I do believe that something as important as financial solvency cannot be parsed out so thinly. And I do know that even those born with weak self-control can learn it. We all have willpower, and the more we train ourselves to exercise it, the more successful we will be in each one of the areas that the marshmallow champions have excelled in. Those of us given the gift of the capacity to defer gratification, the root character trait at issue here, may have a special "FIRE" within us capable of kindling the flickers of responsibility residing within us all.


Please share your thoughts in our comments section. Meanwhile, Seeking Alpha has added podcasts to its repertoire - from me and others; for a weekly "best of" digest, follow SA Multimedia ; you can also follow my feed on iTunes .

See also Is Apple At $1 Trillion Good Or Bad? on

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.