Table of contents:
- 1. Everyone gets what they deserve
- 2. Experience is the best advisor
- 3. History helps to model the future
- 4. Pessimism is a more realistic strategy than optimism
- 5. It's worth investing in science
- 6. Wealth is reflected in high-value purchases
- 7. You have no room for error
- 8. Finance is directly related to passion
- 9. Who does not take risks, he does not drink champagne
- 10. What happened in the recent past will continue in the future
2023 Author: Malcolm Clapton | [email protected]. Last modified: 2023-07-28 10:38
Things of status and a willingness to take risks do not at all bring you closer to wealth.
Morgan Housel, a partner at the Collaborative Fund and former columnist for The Motley Fool and The Wall Street Journal, wrote The Psychology of Money. In it he talks about two people. The first person is Grace Groener. She was orphaned at 12 and never married. For most of her life, the woman lived alone in a small house and worked as a secretary. After her death, she left $ 7 million for charity. People who knew her did not understand where Grace got so much money from.
These are the cars that remained in the showroom. Diamonds that are not bought. These are assets in the bank that have not yet been converted into what can be seen. When people say they want to be millionaires, what they really mean is, "I want to spend a million." And that is literally the opposite of being a millionaire.
Wealth is all about empowering you to choose. The financial assets on the balance sheet do just that.
7. You have no room for error
People underestimate the right to make mistakes in almost everything about money. But it is this awareness that helps to be more resilient and patient. Big victories do not happen often, simply because you need to either wait for a good chance, or work hard. So the person who leaves himself room to maneuver in case of mistakes has an advantage over the one who ends the game on failure.
The psychological moment is important here. Perhaps, from a financial point of view, you will experience a 30% decline in your assets. But what will it do with your emotions? There is a chance that you will burn out and give up everything exactly when great opportunities open up in front of you.
8. Finance is directly related to passion
If the pressure of the average person rose by 3%, it would hardly have affected anything. But if the stock market drops 3%, almost everyone will react to it. The reason is that the finance industry has an entertainment function. There is competition, rules, chagrin, victories, defeats, heroes, villains, teams and fans. It's practically a sporting event!
When making financial decisions, it's helpful to constantly remind yourself that the goal of investing is to maximize returns, not minimize boredom. When there is no excitement, this is completely normal. If you want to formulate this as a strategy, then use the thought: opportunities await where there are no other people, because they think it is boring.
9. Who does not take risks, he does not drink champagne
The risk is important, but it must be justified and meaningful. For example, when playing Russian roulette, the statistics are on your side. But none of the potential gains will cover what can happen if you fail. Therefore, if your financial risk can end in complete ruin, then its likely growth is not worth it, even if there is a chance of success.
10. What happened in the recent past will continue in the future
A very common property of the psyche is the tendency to believe that what has just happened should continue. And this affects our behavior. Each major financial gain or loss is accompanied by expectations of new successes or failures. For example, after the stock market fell 40% in 2008, another imminent crash was predicted for many years.
However, in most cases, if something significant happens, then it no longer repeats. And if it does happen again, it doesn't - or shouldn't - affect your actions the way you tend to think. Because expectations, supported by recent circumstances, are short-term, and financial goals are long-term.
A stable strategy that can withstand any change is almost always superior to that associated with recent events.
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