Psychology of Money

1. The Psychology of Money
My Notes.
Prince R.

2. 1. NO One is Crazy!
We all do Crazy things with money – but what
seems crazy to you may be very subjective.
All make decisions based on their own unique
experiences that seem to make sense to them in
that given context.

3. 2. Luck Vs Risk!
Both are sides of the same coin. One doesn’t exist
without the other.
Investing successes are hugely influenced by this
combine than by Skill and effort – far more than
we attribute to!

4. 3. Never Enough!
When it comes to money, someone will always have
more than you. That’s okay!
It’s fine to pursue more money, but don’t start
making risky bets that put what you have at risk
for something that you don’t need.

5. 4. Confounding Compounding!
Leverage the Magic of Compounding!..
Have patience.. Don’t take big risks often…Stay the
course… Start as early as possible.!

6. 5. Getting Wealthy Vs Staying Wealthy!
Getting money requires taking risks, being
Optimistic.
Keeping Money requires the opposite of taking risk.
It requires humility, frugality, and the realization
that success may not always be repeatable

7. 6. Tails you win!
The investment decisions you make the 90% of
times don’t matter much.
It’s those decisions you make on those watershed
moments– a massive downturn, a frothy market, a
speculative bubble, etc. – that make all the
difference!

8. 7. Freedom!
The ability to do what you want, when you want,
for as long as you want has an infinite payoff.
The choice of Controlling your time is the highest
dividend money pays!

9. 8. Freedom!
The ability to do what you want, when you want,
for as long as you want has an infinite payoff.
The choice of Controlling your time is the highest
dividend money pays!

10. 9. Man in the Car paradox!
When you see someone driving a nice car, you
rarely think about how cool the guy driving the car
is.
Instead, you think about how cool other people
would think I were if I had a car like that!

11. 10. Wealth is what you don’t see!
Wealth is the nice cars not purchased. The
diamonds not bought. The watches not worn, the
clothes forgone, and the first-class upgrade
declined.
We often judge wealth by what we see!

12. 11. Savings!
Building wealth has nothing to do about your
income or investment returns, it is a direct
function of your savings rate!

13. 12. Reasonable > Rational!
Don’t aim to be coldly rational in making financial
decisions.
Aim to be reasonable. It is more realistic, and you
have better chances of sticking with it for the long
run, which is what matters the most when managing
money.

14. 13. Surprise!
Things that have never happened before, happen
all the time!
If you rely too much on investment history, you will
miss the very outliers that matter most.

15. 14. Room for Error!
Always have a solid margin of Safety!
You can plan for all risks, except those that seem
crazy to even think about. And just those crazy
things can hurt you the most because they happen
more often than you think, and you might not have
planned how to handle them

16. 15. You’ll change!
Be flexible!
It’s hard to make enduring long-term decisions
when your view of what you’ll want in the future is
likely to shift.

17. 16. Nothing is Free!
Everything has a price, and the key to a lot of
things with money is just figuring out what that
price is and being willing to pay it.
The problem is that the price of a lot of things is
not obvious until you’ve experienced them
firsthand, when the bill is overdue.

18. 17. You and Me!
Few things matter more with money than
understanding your own time horizon and not being
persuaded by the actions and behaviors of people
playing different games than you are.
Escape FOMO and know your game well!

19. 18. The Seduction of Pessimism.
Pessimism often sounds smarter and more
persuasive than optimism. If something is not going
well, it’s easy to think that it will continue so.
But problems often create demand for change and
solutions. And this leads to ingenuity that creates
changes that only the optimist might believe in.

20. 19. When you’ll believe anything!
We love creating stories about why certain things
happened in past. And those stories make us think
that the world is understandable and makes sense
in some way. However, What happened may have
been completely random …..

21. ……... yet our stories delude us into thinking that
there is some lesson we can learn to better predict
the future.
Avoid the illusion that you have full control in the
uncertain world in which we live.

22. Hope you Enjoyed it!
Further reading:
Collab Blog · Collab Fund