The Psychology of Money by Morgan Housel
Having more money will make you happier ONLY if that means you’ll have more control over your time.
“I did not intend to get rich. I just wanted to get independent.” Charlie Munger.
Money Misunderstandings
Compounding
- Start investing with whatever you can afford, and stay invested.
- Leverage the power of compounding.
Volatility
- It’s not possible to get high returns without volatility.
- It’s the emotional price you need to pay if you want good annual returns.
- Embrace volatility. Volatility is a fee, not a fine.
Tail investments
- It’s hard to predict what will be the “next big thing”, therefore it’s important to diversify.
- A tail investment is single investment that massively outperform all others, and made up for several bad investments.
- Make many diversified investments to benefit from a few tail investments.
Quotes
“There is no reason to risk what you have and need for what you don’t have and don’t need.”
“Long tails – the farthest ends of a distribution of outcomes – have tremendous influence in finance, where a small number of events can account for the majority of outcomes.”
“The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.”
“Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret – all of which are easy to overlook until you’re dealing with them in real time.”
“Few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are.”