The Psychology of Money: Timeless lessons on wealth, greed, and happiness

Translated from Dutch. View the original post here

This weekend I read a fascinating book on the psychology of money.
Below a number of quotes that I wrote down. Or rather cut and pasted 😃
I have a number of eye openers for me.


I was just looking for a rationalization for myself of rising or falling rates and then I read this:

Drops are your (Disneyland) ticket to your return

“Disneyland tickets cost $100. But you get an awesome day with your kids you'll never forget. Last year more than 18 million people thought that fee was worth paying. Few felt the $100 was a punishment or a fine. The worthwhile tradeoff of fees is obvious when it's clear you're paying one. Same with investing, where volatility is almost always a fee, not a fine. Market returns are never free and never will be. They demand you pay a price, like any other product. You're not forced to pay this fee, just like you're not forced to go to Disneyland. You can go to the local county fair where tickets might be $10, or stay home for free. You might still have a good time. But you'll usually get what you pay for. Same with markets. The volatility/ uncertainty fee—the price of returns—is the cost of admission to get returns greater than low-fee parks like cash and bonds. The trick is convincing yourself that the market's fairy is worth it. That's the only way to properly deal with volatility and uncertainty—not just putting up with it, but realizing that it's an admission fee worth paying. There's no guarantee that it will be. Sometimes it rains at Disneyland. But if you view the admission fee as a fine, you'll never enjoy the magic. Find the price, then pay it.”

Always Sunk Costs

“continued, “he said the words I've never forgotten: 'I have no sunk costs. '” 49 Sunk costs—anchoring decisions to past efforts that can't be refunded—are a devil in a world where people change over time. They make our future selves prisoners to our past, different, selves. It's the equivalent of a stranger making major life decisions for you. Embracing the idea that financial goals made when you were a different person should be abandoned without mercy versus put on life support and dragged on can be a good strategy to minimize future regret. The quicker it's done, the Sooner you can get back to compounding. Next, let's talk about compounding's price of admission.”

Freedom is your real return

“To repeat a point we've made a few times in this book: The ability to do what you want, when you want, for as long as you want, has an infinite ROI.”

About risk

“Nassim Taleb says, “You can be risk loving and yet completely averse to gelding.” And indeed, you should.”

From your mistakes you can learn that surprises will always be there again..

“At a 2017 dinner I attended in New York, Daniel Kahneman was asked how investors should respond when our forecasts are wrong. He said: Whenever we are surprised by something, even if we admit that we made a mistake, we say, 'Oh I'll never make that mistake again. ' But, in fact, what you should learn when you make a mistake because you did not anticipate something is that the world is difficult to anticipate. That's the correct lesson to learn from surprises: that the world is surprising. The correct lesson to learn from surprises is that the world is surprising. Not that we should use past surprises as a guide to future boundaries; that we should use past surprises as an admission that we have no idea what might happen next.”



— The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel https://a.co/55wVvPo

#investing