Psychology of Money.pdf

Psychology of Money

1. The Psychology of Money
My Notes.
PrinceR.

2. 1.NOOneisCrazy!
WealldoCrazythingswithmoney–butwhat
seemscrazytoyoumaybeverysubjective.
Allmakedecisionsbasedontheirownunique
experiencesthatseemtomakesensetothemin
thatgivencontext.

3. 2.LuckVsRisk!
Botharesidesofthesamecoin.Onedoesn’texist
withouttheother.
Investingsuccessesarehugelyinfluencedbythis
combinethanbySkillandeffort–farmorethan
weattributeto!

4. 3.NeverEnough!
Whenitcomestomoney,someonewillalwayshave
morethanyou.That’sokay!
It’sfinetopursuemoremoney,butdon’tstart
makingriskybetsthatputwhatyouhaveatrisk
forsomethingthatyoudon’tneed.

5. 4.ConfoundingCompounding!
LeveragetheMagicofCompounding!..
Havepatience..Don’ttakebigrisksoften…Staythe
course…Startasearlyaspossible.!

6. 5.GettingWealthyVsStayingWealthy!
Gettingmoneyrequirestakingrisks,being
Optimistic.
Keeping Money requires the opposite of taking risk.
It requires humility, frugality, and the realization
that success may not always be repeatable

7. 6.Tailsyouwin!
Theinvestmentdecisionsyoumakethe90%of
timesdon’tmattermuch.
It’sthosedecisionsyoumakeonthosewatershed
moments–amassivedownturn,afrothymarket,a
speculativebubble,etc.–thatmakeallthe
difference!

8. 7.Freedom!
Theabilitytodowhatyouwant,whenyouwant,
foraslongasyouwanthasaninfinitepayoff.
ThechoiceofControllingyourtimeisthehighest
dividendmoneypays!

9. 8.Freedom!
Theabilitytodowhatyouwant,whenyouwant,
foraslongasyouwanthasaninfinitepayoff.
ThechoiceofControllingyourtimeisthehighest
dividendmoneypays!

10. 9.ManintheCarparadox!
Whenyouseesomeonedrivinganicecar,you
rarelythinkabouthowcooltheguydrivingthecar
is.
Instead,youthinkabouthowcoolotherpeople
wouldthinkIwereifIhadacarlikethat!

11. 10.Wealthiswhatyoudon’tsee!
Wealthisthenicecarsnotpurchased.The
diamondsnotbought.Thewatchesnotworn,the
clothesforgone,andthefirst-classupgrade
declined.
Weoftenjudgewealthbywhatwesee!

12. 11.Savings!
Buildingwealthhasnothingtodoaboutyour
incomeorinvestmentreturns,itisadirect
functionofyoursavingsrate!

13. 12.Reasonable>Rational!
Don’taimtobecoldlyrationalinmakingfinancial
decisions.
Aimtobereasonable.Itismorerealistic,andyou
havebetterchancesofstickingwithitforthelong
run,whichiswhatmattersthemostwhenmanaging
money.

14. 13.Surprise!
Thingsthathaveneverhappenedbefore,happen
allthetime!
Ifyourelytoomuchoninvestmenthistory,youwill
misstheveryoutliersthatmattermost.

15. 14.RoomforError!
AlwayshaveasolidmarginofSafety!
Youcanplanforallrisks,exceptthosethatseem
crazytoeventhinkabout.Andjustthosecrazy
thingscanhurtyouthemostbecausetheyhappen
moreoftenthanyouthink,andyoumightnothave
plannedhowtohandlethem

16. 15.You’llchange!
Beflexible!
It’shardtomakeenduringlong-termdecisions
whenyourviewofwhatyou’llwantinthefutureis
likelytoshift.

17. 16.NothingisFree!
Everythinghasaprice,andthekeytoalotof
thingswithmoneyisjustfiguringoutwhatthat
priceisandbeingwillingtopayit.
Theproblemisthatthepriceofalotofthingsis
notobviousuntilyou’veexperiencedthem
firsthand,whenthebillisoverdue.

18. 17.YouandMe!
Fewthingsmattermorewithmoneythan
understandingyourowntimehorizonandnotbeing
persuadedbytheactionsandbehaviorsofpeople
playingdifferentgamesthanyouare.
EscapeFOMOandknowyourgamewell!

19. 18.TheSeductionofPessimism.
Pessimismoftensoundssmarterandmore
persuasivethanoptimism.Ifsomethingisnotgoing
well,it’seasytothinkthatitwillcontinueso.
Butproblemsoftencreatedemandforchangeand
solutions.Andthisleadstoingenuitythatcreates
changesthatonlytheoptimistmightbelievein.

20. 19.Whenyou’llbelieveanything!
Welovecreatingstoriesaboutwhycertainthings
happenedinpast.Andthosestoriesmakeusthink
thattheworldisunderstandableandmakessense
insomeway.However,Whathappenedmayhave
beencompletelyrandom…..

21. ……...yetourstoriesdeludeusintothinkingthat
thereissomelessonwecanlearntobetterpredict
thefuture.
Avoidtheillusionthatyouhavefullcontrolinthe
uncertainworldinwhichwelive.

22. HopeyouEnjoyedit!
Furtherreading:
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