Quotes & Lessons from "The Psychology of Money" by @morganhousel

@dmuthuk @DividendGrowth @warikoo

"Financial success is not a hard science."

It’s a soft skill, where how you behave is more important than what you know"
1. No One’s Crazy

"Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works."

People do some crazy things with money. But no one is crazy

Make decisions based on your goals.
2. Luck & Risk

"Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort."

You are one person in a game with seven billion other people and infinite moving parts.

Skill or Luck sometimes difficult to pinpoint.
3. Never Enough

"Happiness, as it’s said, is just results minus expectations."

The hardest financial skill is getting the goalpost to stop moving.

Social comparison is the battle that can never be won.
4. Confounding Compounding

"$81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday."

His skill is investing, but his secret is time.

If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon
5. Getting Wealthy vs. Staying Wealthy

"Good investing is not necessarily about making good decisions. It’s about consistently not screwing up."

If I had to summarize money success in a single word it would be 'survival'.
6. Tails, You Win

"You can wrong half the time and still make a fortune"

A small number of events can account for the majority of outcomes.

Genius is the man or woman who can do the average thing when all those around them are going crazy
7. Freedom

"The ability to do what you want, when you want, with who you want, for as long as you want, is priceless"

Having control of how and who you spend your time with is the key.

"Wealth takes many forms."
8. Man in the Car Paradox

“No one is impressed with your possessions as much as you are.”

Humility, kindness, and empathy will bring you more respect than anything else.
9. Wealth is What You Don’t See

"Spending money to show people how much money you have is the fastest way to have less money."

We can’t see people’s bank accounts or brokerage statements.

Wealth is hidden.
10. Save Money

"Building wealth has little to do with your income or investment returns and lots to do with your savings rate"

You can build wealth without a high income, bt hv no chance of building wealth without a high savings rate

Independence is driven by your savings rate
11. Reasonable > Rational

"Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable"

Rational investor makes decisions based on numeric facts. A reasonable investor makes them in a conference room surrounded by co-worker.
12. Surprise!

"The correct lesson to learn from surprises is that the world is surprising"

History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world.
13. Room for Error

"Margin of safety—you can also call it room for error or redundancy"

The most important part of every plan is planning on your plan not going according to plan.

Always have a buffer.
14. You’ll Change

"Long-term planning is harder than it seems because people’s goals and desires change over time."

We should avoid the extreme ends of financial planning.

We should also come to accept the reality of changing our minds.
15. Nothing’s Free

"Everything has a price, but not all prices appear on labels."

Most things are harder in practice than they are in theory.

The price of investing success is not immediately obvious.

Thinking of market volatility as a fee rather than a fine.
16. You & Me

"Beware taking financial cues from people playing a different game than you are."

Smart, informed, & reasonable people can disagree in finance, because people hv vastly different goals and desires.
There is no single right answer; just the answer that works for you
17. The Seduction of Pessimism

"Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you."

Progress happens too slowly to notice, but setbacks happen too quickly to ignore.
18. When You’ll Believe Anything

"The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true."

Incentives are a powerful motivator.
Accept that most things are outside your control.

Everyone has an incomplete view of the world.

- End.

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17 Oct 20
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