Finance is no science. It involves the tiny actions and feelings of millions of people.
Finance writer Morgan Housel published a tidy book last year called the Psychology of Money that does a fine job communicating the concept. I quite liked it, so I’ve shared a few quick takeaways I got from the book. Consider buying your own copy.
Here’s a 2018 blog post he wrote honing the topic.
Here are a few notes:
- “The hardest financial skill is getting the goal post to stop moving.”
- Start early; Be patient “$81.5 billion of Warren Buffet’s $84.5 billion net worth came after his 65th birthday”
- Be long term optimistic and short term paranoid
- Investing is like the pilot quip: “The job is hours and hours of boredom punctuated by moments of sheer terror.” What do you do in crisis?
- You can control your savings rate but you can’t control your investment gains. Focus on the first by humbly not needing a lot.
- Invest reasonably not rationally (have investment you love and stick with them; always prioritize what helps you sleep at night)
- View market volatility as a fee for returns over time, not a fine to be avoided or tricked, as few succeed doing.