Investing And The Marshmallow Test

Kids Marshmallow Test

What do marshmallows have to do with investing?  Check out this set of video links and one sees the connection, particularly as it relates to The Golden Rule of Investing.

The first video simply demonstrates the test – without any conclusions.  Children are placed in a room with one marshmallow in front of them.  If they can refrain from eating the marshmallow until the researcher returns, they will be given a second marshmallow.

While the experiment is interesting to watch, it does not explain why this research was conducted.  To see the followup analysis, watch this video.

This link takes readers to further analysis and reader comments.  The results are amazing.  Interested readers will find other links to the Marshmallow Test if they Google the test.

Is there a link between self-discipline and investing?  Absolutely.  If one stays focused and develops a disciplined practice of saving, the retirement plan is well on its way to success.  However, if one spends money now on unnecessary items, then living in retirement is going to be a struggle.

Portfolio Review – Franklin

Franklin Portfolio Reviewed

In contrast to the recent review of the Kepler Portfolio, where the asset allocation plan is in balance, the screen shot below shows a portfolio that is heavily oriented toward large cap asset classes.  To be fair, the Franklin is a very young portfolio and it came with a pre-existing asset allocation condition.  We worked on the Kepler portfolio for several years to get it into its current condition and the same attention needs to be given to the Franklin.  By the beginning of 2012, I expect the asset allocation dashboard will look significantly different.

As pointed out in prior blog posts, it is our intention to let the current allocation play out until the end of the first quarter so all dividends will flow back into the portfolio.  By the end of the summer should give adequate time to reorient the asset classes.

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