Mistakes & Errors - Deepstash
The Psychology of Money

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The Psychology of Money

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Mistakes & Errors

Mistakes & Errors

History is an unassailable guide to the future. A trap many investors fall the “historians as prophets” fallacy: an over-reliance on past data as a signal to future conditions in a field where innovation and change are the lifeblood of progress. Past performance is not indicative of future results—the world changes.

  • Good ideas taken too far are indistinguishable from bad ideas.
  • People underestimate the need for room for error in almost everything they do that involves money.

3.03K

5.48K reads

MORE IDEAS ON THIS

Man in the Car Paradox

Man in the Car Paradox

No one is impressed with your possessions as much as you are.

People tend to want wealth to signal to others that they want to be liked and admired. But in reality, those other people often bypass admiring you, not because they don’t think wealth is admirable, but because t...

3.18K

7.01K reads

Getting Wealthy vs. Staying Wealthy

Getting Wealthy vs. Staying Wealthy

Good investing is not about making good decisions. It’s about consistently not screwing up. There are a million ways to get wealthy. The only way to stay wealthy is some combination of frugality and paranoia.

  • Money success in a single word: survival. The ability to sti...

3.29K

10.9K reads

Save Money

Save Money

Building wealth has little to do with your income or investment returns and more to do with your savings rate. The value of wealth is relative to what you need. A high savings rate means having lower expenses than you otherwise could, and having lower expenses means your savings ...

3.16K

6.25K reads

True Wealth Is Freedom

True Wealth Is Freedom

Controlling your time is the highest dividend money pays. The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want, when I want, with who I want, for as long as I want.” This is the highest dividend money pays:

  • The ...

3.37K

7.65K reads

Luck & Risk

Luck & Risk

Nothing is as good or as bad as it seems. Every outcome in life is guided by forces other than individual effort. Bill Gates had a competitive advantage over millions of other students because he attended one of the only high schools in the world that had the cash and foresig...

3.32K

18.3K reads

Money = Behaviour

Money = Behaviour

Doing well with money is not necessarily about what you know, but about how you behave. Is what Morgan Housel explores in his popular book, where he shares 19 stories that explore the behavioral aspects of personal finance.

To Note:

  • Financial success is n...

3.73K

28.6K reads

The Seduction of Pessimism

The Seduction of Pessimism

Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.

In finance, pessimism is paid more attention than optimism and is, therefore, more persuasive. “It’s easier to create a narrative around pessimism because the story pieces tend to be f...

3.04K

4.65K reads

The Compounding Of Money

The Compounding Of Money

Our minds are not built to handle the reality that compounding leads to logic-defying results.

Warren Buffett’s fortune isn’t due to just being a good investor. Rather it’s due to being a good investor since he was a child. Simplifying we can say he then just waited.

3.14K

12.8K reads

Nothing is Ever Enough

Nothing is Ever Enough

Rich people do crazy things. Bernie Madoff had everything only to lose everything because he had no sense of enough. The lesson? There is no need to risk what you have and need for what you don’t have and don’t need.

  • The hardest financial skill is getting the ...

3.5K

16K reads

Nothing Is Free

Nothing Is Free

Everything has a price, but not all prices appear on labels.

The price of investing success is not immediately obvious. It’s not a price tag you can see, so when the bill comes due, it doesn’t feel like a fee for getting something good. It feels like a fee for doing somethi...

3.03K

4.85K reads

You & Me

You & Me

Avoid taking financial cues from people playing a different game than you are.

Few things matter more with money than understanding your own time horizon and not being persuaded by the actions & behaviors of people playing different games than you are. Go out of your way to...

3.01K

4.93K reads

Leave Room for Error

Leave Room for Error

The most important part of every plan is planning on your plan, not going according to plan.

Have room for error when estimating your future returns. For his own investments, Housel assumes the future returns he’ll earn in his lifetime will be ⅓ lower than the historic aver...

3.04K

5.31K reads

Believing In Narratives

Believing In Narratives

Stories trump statistics. The more you want something to be true, the more likely you are going to believe a story that overestimates the odds of it being true.

  • The more you want something to be true, the more likely you are to believe a story that overestimates the od...

3.06K

4.69K reads

BILL GATES

Success is a lousy teacher, it seduces smart people into thinking they can’t lose.

BILL GATES

3.39K

22.2K reads

Tails, You Win

Tails, You Win

You can be wrong half the time and still make a fortune.

Anything that is huge, profitable, famous, or influential is the result of a tail event, an outlying one-in-thousands or millions event.

  • Most of our attention goes to things that are huge, profitable, famou...

3.06K

8.43K reads

No One’s Crazy

No One’s Crazy

Everyone looks at money through the lens of their past experiences.

You can read what it was like to lose everything during, say, The Great Recession, but you will never bear the emotional scars of those who survived it and are now afraid to invest again. It’s impo...

3.14K

12.3K reads

True Wealth Is What You Don’t See

True Wealth Is What You Don’t See

Spending money to show people how much money you have is the fastest way to have less money.

We tend to judge wealth by what we see because that’s the information we have in front of us. But the truth is that wealth is what you don’t see. Rich is a current income. Nice cars...

3.22K

6.7K reads

The Uncertain Future

The Uncertain Future

Long-term planning is harder than it seems because people’s goals and desires change over time.

We’re such poor forecasters of our future selves that there’s a term for this phenomenon: The End of History Illusion. We’re aware of how much we’ve changed in t...

3.12K

5.11K reads

Reasonable > Rational

Reasonable > Rational

Aiming to be mostly reasonable works better than trying to be coldly rational.

“Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable. Reasonable is more realistic, and you have a better chance of sticking with it for the lon...

3.12K

6.71K reads

CURATED FROM

CURATED BY

pipge

Total food specialist. Friendly webaholic. Coffee fan. Proud analyst. Tv expert. Explorer. Travel nerd. Incurable beer advocate.

The Psychology of Money is a collection of short stories exploring the strange ways people think about money and teaches you how to make better sense of it.

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