18 Timeless lessons from the book The Psychology of Money:
1. No one's crazy
Different experiences can lead to vastly different views.
Your personal experience make up less than 0.0000001% of what's happened in the world, but around 80% of how you think the world works.
Different experiences can lead to vastly different views.
Your personal experience make up less than 0.0000001% of what's happened in the world, but around 80% of how you think the world works.
2. Luck & Risk
Success is a louse teacher. It seduces smart people into thinking they can't lose.
Success is a louse teacher. It seduces smart people into thinking they can't lose.
3. Never enough
The hardest financial skill is getting the goalpost to stop moving.
Happiness = results - expectations
The hardest financial skill is getting the goalpost to stop moving.
Happiness = results - expectations
4. Confounding Compounding
Compound interest is the eighth wonder of the world.
Never interrupt it unnecessarily.
Compound interest is the eighth wonder of the world.
Never interrupt it unnecessarily.
5. Getting wealthy versus staying wealthy
You can get wealthy by taking a lot of risk.
But there is only one way to stay wealthy: a combination of frugality and paranoia.
You can get wealthy by taking a lot of risk.
But there is only one way to stay wealthy: a combination of frugality and paranoia.
6. Tails, you win
The secret to successful investing is letting your winners run.
You only need a few BIG winners during your investment career.
The secret to successful investing is letting your winners run.
You only need a few BIG winners during your investment career.
7. Freedom
True wealth is having time to do what you want to do, whenever you want to do it.
True wealth is having time to do what you want to do, whenever you want to do it.
8. Man in the car paradox
Don't 'buy things you don't need with money you don't have to impress people you don't like.
Don't 'buy things you don't need with money you don't have to impress people you don't like.
9. Wealth is what you don't see
True wealth is income not spent.
Invest at least 10% of your income every single month.
True wealth is income not spent.
Invest at least 10% of your income every single month.
10. Save money
Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
Savings are the gap between your ego and your income.
Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
Savings are the gap between your ego and your income.
11. Reasonable > Rational
Don't aim to be coldly rational when making financial decisions.
Aim to just be pretty reasonable.
Don't aim to be coldly rational when making financial decisions.
Aim to just be pretty reasonable.
12. Surprise!
The most important events in history are the big outliers.
0.0000000000004% of people were responsible for the majority of the world's direction over the past decade.
The most important events in history are the big outliers.
0.0000000000004% of people were responsible for the majority of the world's direction over the past decade.
13. Room for error
You have to give yourself room for error.
That's why you should always use a margin of safety.
You have to give yourself room for error.
That's why you should always use a margin of safety.
14. You'll change
People are poor forecasters of their future selves.
Financials goals made when you were a different person should be abandoned.
People are poor forecasters of their future selves.
Financials goals made when you were a different person should be abandoned.
15. Nothing's free
The problem is that the price of a lot of things is not obvious until you've experienced them.
Always take into account opportunity costs.
The problem is that the price of a lot of things is not obvious until you've experienced them.
Always take into account opportunity costs.
16. You & Me
Every investor is unique.
Base your investment plan on your own goals and time horizon.
Every investor is unique.
Base your investment plan on your own goals and time horizon.
17. The seduction of pessimism
Pessimism just sounds smarter and more plausible than optimism.
In the long run, stocks always go up.
Pessimism just sounds smarter and more plausible than optimism.
In the long run, stocks always go up.
18. When you'll believe anything
You know a lot less about how the world works than you think you do.
Always keep an open mind and keep learning.
You know a lot less about how the world works than you think you do.
Always keep an open mind and keep learning.
The end.
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If you liked this, you'll love our website.
āŖļø Each Tuesday we share 5 investment insights
āŖļø Each Thursday we publish a deeper investment article
Start your journey here:
qualitycompounding.substack.com
@morganhousel is one of the best writers of financial books and content.
I love this quote from him. Credits for the visual go to @BrianFeroldi.
I love this quote from him. Credits for the visual go to @BrianFeroldi.
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