14 Most Important Rules: The Psychology of Money

Understanding the psychological aspects of the markets might help you “WIN” in this bull cycle.

What's better than understanding “The Psychology of Money”?

I’m launching a new content rubric: “I read the book so you don’t have to”. In these posts, you’ll find a concise distilled summary of the most transformative insights from any given book.

Starting with “The Psychology of Money” by Morgan Housel — an international bestseller.

No one is wrong

• What seems irrational to me might be rational within another's context of personal experiences. • Buying a lottery ticket, investing in high risk assets, makes sense to people.

The role of luck and risk in financial success

• Make decisions that allow for a margin of safety • Diversify your investments to mitigate risks • Remember raise and fall of GameStop

Compounding

• Compounding → Small + Regular = Substantial sums • Investing X amount for 5 years would be 7 Figs today

Getting wealthy vs. Staying wealthy

• Low risk investments to preserve the wealth, ones you have accumulated it

Tails, You Win

• Recognize that a few events can lead to the most significant outcomes • Upcoming Bitcoin halving pushed the price of Bitcoin to $73,000

Money = Time = Freedom

• Use wealth to gain control over your time • Financial independence gives you the power to pursue your interests and work on your terms

Wealth is relative

• Measure your success by your own standards not by comparing to others

Save Money

• Saving money is crucial for financial security and building wealth • Live below your means and consistently save a portion of your income

Reasonable > Rational

• Focus on making good enough financial decisions consistently rather than striving for perfection.

Room for Error

• Build a financial cushion to protect against unforeseen events and market volatility (emergency fund)

You’ll Change

• Personal and financial goals evolve over time • Reassess your financial plan to align with your changing life goals

Nothing’s Free

• Weight the costs and benefits of your financial choices to make informed decisions that align with your goals

You & Me

• People have different financial views points and behaviours, influenced by their unique experiences and emotions. • That being said, there is no one-size-fits-all approach to money

The Seduction of Pessimism

• Pessimism sounds smarter and more intellectually appealing than optimism, but it's often misleading. • This is why negative news trends more than positive ones

14 Most Important Rules: The Psychology of Money

Author

ABN ASIA was founded by people with deep roots in academia, with work experience in the US, Holland, Hungary, Japan, South Korea, Singapore, and Vietnam. ABN Asia is where academy and technology meet opportunity. With our cutting-edge solutions and competent software development services, we're helping businesses level up and take on the global scene. Our commitment: Faster. Better. More reliable. In most cases: Cheaper as well.

Feel free to reach out to us whenever you require IT services, digital consulting, off-the-shelf software solutions, or if you'd like to send us requests for proposals (RFPs). You can contact us at contact@abnasia.org. We're ready to assist you with all your technology needs.