5 Lessons from the Psychology of Money
Top 5 Lessons from The Psychology of Money” by Morgan House!
1. Compounding Sustained long-term investments beat short termed high-return interests over time due to compound interest.
Fun fact: Warren Buffet accumulated 97% of his wealth after his 65th birthday.
2. Reasonable vs. rational Beware of the difference between acting upon emotion and rational thoughts. One is not better than the other. Sometimes, acting reasonably instead of rationally even when the numbers don’t add up on your spreadsheets, could lead to huge success.
3. Setbacks Losing money once in a while is normal but you shouldn’t think that you lost money because you necessarily messed up. Look at it as a fee for investing and making profitable returns over time instead of a fine that needs to be paid for doing something wrong.
4. Benchmarks Don’t compare your profits and returns to those of other investors. Measure your success by what makes you happy and what your goals are. Investing is not a race and you don’t have to feel ashamed or entitled based on how little or how much profit you made.
5. Tails, you win Long tails, or the extremes of the distribution of outcomes, have enormous sway in finance, where a small number of events account for the vast majority of results. A tail event is the cause of anything huge, profitable, famous, or influential.
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