Review of Pschology of Money
Tags: books
These are my rough notes while reading this book
Most of the premise of the book seems to be wait and invest. Let the money grow in compound interest over years.
He is not advocating any strategy to get rich quicker? He says highest returs are usually one-off hits that can't be repeated.
Jesse Livermore made a fortune when stocks collapsed in Great Depression of 1929. He shorted the stocks. I've yet to learn to short the stock.
Getting money requires taking risk. But staying wealthy requires opposite of taking risk. It requires frugality and acceptance of the fact that some of your success is attributed to luck which can't be repeated.
Jim Simmons achieved better investment returns than Warren Buffett. Yet he was less wealthy than Buffett. The main reason was that Warren Buffett started investing at young age, and compounded his money for decades. In contrast, Jim Simmons began investing around his 40s.
Having a six-month emergency fund and save 10% of your salary.
Bill Gates went to one of the only high schools in the world that had a computer (Lakeside School).
Economist Bhaskhar Mazumder has shown that incomes among brothers are more correlated than height or weight. If you are rich and tall, your brother is more likely to also be rich than he is tall. I think most of us intuitively know this to be true - the quality of your educations and the doors that open for you are heavily linked to your parents' socio-econmomic status.
..think Mark Zuckerberg is a genius for turning down Yahoo!'s 2006 $1 billion offer to buy his company. But people criticize Yahoo! for turning down buyout offer from Microsoft.
40% of all Russell 3000 stock components lost at least 70% of their value and never recovered…you have to achieved a certain level of success to become a public company and a member of Russell 3000.
No one talks about dud picks. Charlie Munger, "If you remove just a few of Berkshire's top investments, its long-term track record is pretty average"
Universal fuel of joy -it's that people want to control their lives.
99.9% of all companies that were created went out of business.
One study in America found that people overestimate the number of calories they burned in a workout by a factor of four.
The world is filled with people who look modest are actually wealthy and people who look rich who live at the razor's edge of insolvency.
Saving is a hedge against life's inevitable ability to surprise the hell out of you at the worst possible moment.
Day trading and picking individual stocks is not rational for most investors - the odds are heavily against your success.
Progress happens too slowly to notice, but setbacks happen tooo quickly to ignore. There are rarely overnight miracles.
B. H. Lidell Hart writes in is book Why Don't We learn from History ?
[History] cannot be interpreted without the aid of imagination and intuition. The ssheer quantity of evidence is so overwhelming that selection is inevitable. Where there is selection there is art. Those who read history tend to look for what proves them right and confirms their personal opinions. They defend loyalities. They read with a purpose to affirm or to attack. They resist incovenient truth since everyone wants to be on the side of the angels. Just as we start wars to end all wars.
We all want the complicated world we live in to make sense. So we tell ourselves stories to fill int he gaps of what are effectively bind spots.
Manage your money in a way that helps you sleep at night. Time is the most powerful force in investing. It can't neutralize luck and risk, but it pushes reusults closer to wards what people deserve.
Become OK with a lot of things going wrong. You can be wrong half the time and still make a fortuen, because a samll minority of things account for the majority of outcomes.
Use money to gain control over your time, because not having control of yoru time is such a powerful and universal drag on happines. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.
Be nicer and less flashy. No one is impressed with your possessions as much as you are. …you probably want is respect and admiration.
Save. Just save. You don't need a specific reason to save.
Define the cost of success and be ready to pay it. Because nothing worthwhile is free.
You should like risk because it pays off over time. But you should be paranoid of ruinous risk because it prevents you from taking future risks that will pay off over time.
Half of all US mutal fund portfolia manasgers do not invest a cent of their own money in their funds, according to Morningstar. Ken Murray, a professor of medicine at USC, wrote essay How Doctors Die that showed degree to which doctors choose different end-of-life treatments for themselves than theyh recommend for their patients.
Independence, to me, doens't mean you'll stop working. It means you only do the work you like with people you like at the times you want for as long as you want.
We'll have a high chance of meeting all our family's financial goals if we consistently invest money into a low-cost indes fund for decades… a combination of U.S. and international stocks. We max out retirment accoutns in the same funds, and contribue to our kid's 529 college savings plans.
Bendedict Evans says, "The more the Internet exposes people to new points of view, the angrier people get that different views exist."
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