Release year: 2020

Author: Morgan Housel

Link to my handwritten notes

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Review

I have read my share of personal finance books in the past, Les millionaires ne sont pas ceux que vous croyez , Millionaire Teacher , The Wealthy Barber Returns , Liberté 45 , En as-tu vraiment besoin , and La facture amoureuse . While I wouldn’t consider myself an expert in saving and investing, I think I’ve got the basic knowledge required to make it out there. I’ve been looking at the million dollar grid for the past couple years and using it as a reminder of the strength of compounding interest. I have confidence in my investing strategy and have a long term investment horizon.

What then did I learn from reading The Psychology of Money?

To tell you the truth, at first glance, not much. The book contains a lot of common sense that, while surely instrumental for first time readers of personal finance, had no hope of blowing the socks off someone who had already read six books on the subject prior. Luckily, though, and as you’ll see below, the real book’s strength was how it managed to condense wisdom related to investing into short, powerful quotes, that have the potential to save you from making bad decisions if you say them out loud to yourself. It helps us understand our often strange, irrational behaviors around money and helps us reframe them in a more healthy way.

This book is not interested in giving you advice on diversifying your portfolio beyond “consider index funds.” What it will attempt to teach the reader is not to risk what they have and need for a chance at getting what they don’t have and don’t need. In my opinion, that’s an infinitely more valuable lesson.

I definitely recommend this short and sweet book for anyone looking to minimize their regrets in association to money.

Félix rating:
👍

⭐ Star quotes

  • (p. xi) ⭐ A genius is the person who can do the average thing when everyone else is losing their mind.
  • (p. 33) The more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk.
  • (p. 41) Happiness is just results minus expectations.
  • (p. 42) “Enough” is realizing that an insatiable appetite for more will push you to the point of regret.
  • (p. 83) The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”
  • (p. 85) Doing something you love on a schedule you can’t control can fell the same as doing something you hate.
  • (p. 106) One of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility.
  • (p. 139) ✅ The purpose of the margin of safety is to render the forecast unnecessary.
  • (p. 139) A margin of safety is the only effective way to navigate a world that is governed by odds, not certainties.
  • (p. 142) “For my own investments, I assume the future returns I’ll earn in my lifetime will be 30% lower than the historic average. So I save more than I would if I assumed the future will resemble the past. It’s my margin of safety.”
  • (p. 145) The biggest point of failure with money is a sole reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what they might be in the future.
  • (p. 147) Long-term planning is harder than it seems because people’s goals and desires change over time.
  • (p. 152) Assuming you’ll be happy with a very low income, or choosing to work endless hours in pursuit of a high one, increases the odds that you’ll one day find yourself at a point of regret.
  • (p. 171) Financial bubbles do their damage when long-term investors playing one game start taking cues from those short-term traders playing another.
  • (p. 198) ✅ Where there is selection there is art.
  • (p. 216) True success is exiting some rat race to modulate one’s activities for peace of mind.
  • (p. 232) Expectations always move slower than facts.