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Status: Tags: #writings/bookapplications Links: { The Psychology of Money

📚 The Psychology of Money Application

Top 3 Quotes

Ordinary folks with no financial education can be wealthy if they have a handful of behavioral skills that have nothing to do with formal measures of intelligence.

• This shows how mindset is more important than tools

More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.

• Seeing as I get overly greedy at times, this quote provides the appropriate mindset

Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control; a good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy

• People can truly excel when others aren’t capable of doing so

3 Sentence Summary

1. Rather than focusing on the objectivity and laws of finance, we should also acknowledge and work on our psychological feelings and behaviors
2. Everyone has different environments and characteristics, so financial advice is highly subjective
3. The most reliable form of building wealth is safe investments and saving

Author’s Purpose

The aim of this book is to use short stories to convince you that soft skills are more important than the technical side of money. I’ll do this in a way that will help everyone—from Read to Fuscone and everyone in between—make better financial decisions.

Important Ideas

• Personal Differences and their effects in decision-making
• Understanding Probability
• Greed
• Compound Investing
• Acquiring Wealth vs Maintaining Wealth
• The Significance of Rare Events
• Freedom
• Man in the Car Paradox
• Defining Wealth
• The effectiveness of Saving Money
• Reasonableness vs Rationality
• Future Unrpedicability
• Importance of having Room for Error
• Personal change’s influence on My Long Term Goals
• Viewing market volatility as a fine
• Gathering information from relevant sources
• Pessimism
• Being gullible
• Financial tidbits
• Author’s financial beliefs

Personal Revelations

• The stocks I sell go up because stocks usually go up
  • I’m too afraid of pump-and-dumps so I sell, but that rule should not be applied for every stock
    • I can easily set a stop limit if things get rough
• I think all of these points are valid and should be acknowledged in day-to-day life

Principles

Future Plans

Questions

Actions

Further Reading

Practices

• Long-term investing
• Don’t be afraid to spend money to make money

Habits

• When buying something, Am I buying something for the image that associates with it, or because I truly want it?
• When making an investment decision, does this help me sleep at night?

Dailies

• Think about my financial goals and reflect my investments to satisfy it
• Create some general investing rules/questions to uphold my philosophy
  • Risk tolerance?
  • Greed prevention?
  • Desired returns?