Psychology of Money
Morgan Housel

Summary

Timeless finance and investing lessons as told using our own psychology

Notes

Financial success is a soft skill where how you behave is more important than what you become

‘History never repeats itself, man always does.’ - Voltaire

We think we know how the world works but we’ve only experienced a tiny bit of it

Nothing is as good or bad as it seems

Enough. Rich people always want more but what’s enough?

There is no reason to risk what you have and need for what you don’t have and don’t need

The hardest financial skill is getting the goal post to stop moving

Compounding: a small starting base can lead to results so extraordinary they seem to defy logic

Buffet’s skill is investing but his secret is time

Good investing is not only about good decisions, it’s about not screwing up

Money success = survival. Avoid ruin at all costs

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

A small number of events account for the majority of outcomes

Controlling your time is the highest dividend money pays

‘A wise old owl lived in an oak, the more he saw the less he spoke. The less he spoke, the more he heard. Why aren’t we all like that wise old bird?’

Wealth is what you don’t see

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

Savings without a spending goal gives you options and flexibility

Aim to be pretty reasonable in investing instead of coldly rational

‘Things that have never happened before happen all the time.’

What’s happening can be tied to a handful of events that were impossible to predict

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

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

You can’t prepare for what you can’t envision

Everyone underestimates how much our desires change in the future

‘Every job looks easy when you’re not the one doing it.’

You need to convince yourself 20% drawdowns are worth it. It’s the price of admission for playing the game

Every investor in the market has different goal and timelines than you

Stories are more powerful than statistics

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

Everyone has an incomplete view of the world but we use narratives to fill the gaps

Less ego, more wealth

Manage your money in a way that helps you sleep at night

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