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Always Protect The Downside - Darius Foroux

Richard Branson

“It is only by being bold that you get anywhere. If you are a risk-taker, then the art is to protect the downside.”

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Extrapolating our thoughts

A few examples of how we extrapolate our exceptions all the time:

  • “House prices will probably keep increasing.”
  • “That person will never change.”
  • “My business will keep growing.”
  • “I will never learn from my mistakes.”
  • “He doesn’t like me.”

The root of this problem is our quick judgment.

We’re fast thinkers

But that doesn’t mean we should follow through on every single thought that pops into our mind.

Every time you start thinking about future events or start making mental movies, keep count on a post-it note or a small piece of paper. Be aware of your thoughts. But don’t follow through.

Ryan Holiday
Ryan Holiday
“It takes skill and discipline to bat away the pests of bad perceptions, to separate reliable signals from deceptive ones, to filter out prejudice, expectation, and fear.”
Four Steps To Building Wealth
Four Steps To Building Wealth
  1. Don’t Be a Consumerist: keep your expenses as low as possible without sacrificing the quality of life. Spend money on things that yield lasting benefits.
  2. Have An Emergency Fund: this gives you freedom and peace of mind to deal with issues without having to upset your long-term investments.
  3. Invest Defensively: investing in individual stocks is a dangerous business and it can take your peace of mind. Index funds let you invest in a whole group of companies, bonds, etc. without the time and risk involved in individual stocks.
  4. Diversify Income: relying on a single source of income is a dangerous strategy. Multiple sources will make you more financially resilient and give you the resources to acquire assets and invest.
Money rules to increase your net worth
  1. Don't spend all your income at once: the easiest way to grow your bank account is NOT to spend it all.
  2. Know how the Economy works.
  3. Avoid debt; personal debt destroys your net worth like nothing else.
  4. Save as much as you can: find the figures that make you feel comfortable
It takes more time to make money than to spend it

You work thousands of hours to make a certain amount of money. And then, you can drop it all on a new car, luxury vacation, watch, or anything else that you desire.The easiest way to grow your bank account is NOT to spend it all. It’s solid advice. The ancient Stoics knew about this too. True freedom means you desire less.

Know How The Economy Works

Why do economies generally collapse? What’s debt? Who prints money? Why do they print money?You don’t have to be an economist. The point is that basic knowledge about how all this stuff works prevents panic. “Oh shit! The market is down! What now!!” Panicking will not help you.