Pyschology Of Money
2022, May, 24
'Pyschology Of Money' is written by Morgan Housel. It was published in 2020.
It's one of the most impactful non-fiction books I have ever read. It explains concepts related to personal finance, human biases and investing in easy to understand language.
Some of my favorite quotes from the book:
"Two topics impact everyone, whether you are interested in them or not: health and money."
So True. We will always need some money for expenses. Everything that we experience in life is through our body. Health automatically never becomes a priority in life until it's too late.
"History never repeats itself; man always does."
"Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works."
"some lessons have to be experienced before they can be understood"
For example, it's feels easy when we read that investors should buy when stock market is down and hold their investments. But during a market fall in real life, the sheer panic and uncertainity one feels by seeing all prices going down with no visible bottom has to be experienced first hand. There's no alternative. No amount of research or reading about past market crashes can prepared you for how it feels to see your gains and capital being eroded everyday.
"There is no reason to risk what you have and need for what you don’t have and don’t need."
When making any risky decision, one should not just be optimistically influenced by the possible upside but also be aware of the possible downsides. One should proceed only when the loss caused by the downside can be digested.
"Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control."
It's easy to make an investment but hard to hold it for long. One needs to have some emergency funds for short term so that one does not panic immediately during periods of uncertainity.
"It’s not whether you’re right or wrong that’s important but how much money you make when you’re right and how much you lose when you’re wrong."
"doing something you love on a schedule you can’t control can feel the same as doing something you hate."
"Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want."
Definition of Financial Independence.