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The Psychology Of Money Book Pdf Download


The Psychology of Money pdf free download

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The Psychology of Money pdf free download

Details of The Psychology of Money

  • Book Name: The Psychology of Money
  • Authors: Morgan Housel
  • Pages: 256
  • Publish Date: 08 Sept 2020
  • Language: English
  • GenrePersonal finance, entrepreneurship, business, investing, economics

Book review:

There are hundreds of books in the personal finance and investing space. And after a while, they all begin to sound the same. Well, this book here, the "Psychology of Money", dropped in 2020 sharing fresh insights and unique lessons. 

Today, I'm sharing the Top Eight Takeaways from the "Psychology of Money. So let's get into it. (upbeat R&B music) What's up everybody? This is Brandon Hill. And welcome back to my channel where we share content to help young professionals develop personally, professionally, and financially. 

One series of this channel is analyzing popular books and extracting the top takeaways that you all should know. Be sure to check out my Book Reviews and Analysis playlist for other books that we've covered. 

The "Psychology of Money" aims to convince readers that soft skills are more important than the technical side of money. Overwhelmingly, personal finance and investing are taught as math-based fields. People analyze data, history, and trends, all to help them with making optimal decisions. 

However, humans don't always follow what's on the spreadsheet. Author Morgan Housel shares that doing well with money has little to do with how smart you are and a lot to do with how you behave. 

Not many books dive into this topic, so I highly recommend that you read this. It'll open up your eyes to the actions and behaviors you take with your money and why you do so. You'll gain awareness and you'll learn how to navigate your psychology. 

I've pulled out the Top Eight Takeaways that stood out to me when I read this book and we're about to dive into them. If you want to read the "Psychology of Money", I'll put a link in the description where you could purchase the book. 

And if you'd like to listen to this book for free, I'll also put a link in the description for a 30-day free trial to Audible, where you can get one free book if you sign up. Let's dive into the first takeaway. 

Number one, we are taught about money in ways that are too much like Physics and not enough like Psychology. This is the major premise of the entire book. 

The author talks about money being taught like Physics with countless rules and laws, much more than it is ever taught, like Psychology with emotions and nuance. 

For decades, personal finance and investing experts have looked at money in a scientific way. They find things such as the optimal asset allocation for your portfolio. The ideal risk-to-reward ratio for every age, and what exact portion of your income you should save every month. 

And while this is all sound advice, the author points out that the emotions and biases of humans aren't considered enough. You know, it might be optimal for you to put 60% of your money in stocks and 40% in bonds. But how does that feel for you personally? Are you okay with that? 

Number two, a genius who loses control of their emotions can be a financial disaster. The opposite is also true. This is an important point that Morgan Housel brings up. He mentions how ordinary people with no financial education could still be wealthy if they have a handful of behavioral skills. 

And these skills have nothing to do with any form of formal intelligence. This could be relieving to someone who is just starting to think about their money and may be intimidated by the thought of managing and investing that money. 

All someone has to do is follow several simple money principles and not let their emotions derail them. For example, if someone saves a portion of their income, keeps an emergency fund, and invest primarily in index funds for the longterm, they can outperform someone who may have better financial literacy, but lets their emotions get the best of them. 

Number three, in the real world, people do not want the mathematically optimal strategy. The world of academic finance is devoted to finding the mathematically optimal investment strategies. Morgan mentions that his own theory is that in the real world, people don't really want these optimized strategies. 

What they really want, is a strategy that helps them sleep at night. Traditional finance may prescribe to you that at age 25, you should have 75% of your portfolio invested in stocks. But with 75% in stocks, that's gonna come with more volatility. 

If you're someone who is risk averse, you're not gonna like this volatility. And a portfolio with 75% in stocks might be too much for your personal preference, and it might make you lose sleep at night if you can't take the ups and downs of the market. 

The author points out that you don't need to do every single thing optimally with your finances. Just do what helps you sleep better at night. Be reasonable with yourself instead of blindly following these finance and investing rules. 

Take away four, the hardest financial skill is getting the goalpost to stop moving. Think of a goalpost on the football field. If you're a player and you're on the 50-yard line, and your team is doing good, eventually you'll move down the field until you reached the goalpost for a touchdown. 

The touchdown is the goal. Now think of the same field for your personal finances. The goalpost could represent something like satisfaction with yourself and what you have. For most people out there, their goalpost keeps on moving as they approach closer to it. 

They earn more money from their investing and their career, but they never quite reached a level of satisfaction because they keep wanting more. If their goal post is a $100,000-a-year salary, once they get to that level, all of a sudden they desire 150,000-a-year salary. 

Morgan Housel says, "You need to know when you have enough or you will forever keep chasing." 

Number five, good investing is not necessarily about making good decisions. It's about consistently not screwing up. Most people think about all the things they have to do or have to learn in order to become a good investor. 

There are countless bonds, stocks, options, commodities, and real-estate assets that you could potentially keep track of. But instead of focusing on all that, you should really focus on not screwing up. A level of frugality and paranoia will help you avoid the pitfalls of money. 

Things such as saving or insurance, could help protect you in the event of some type of financial disaster. And dollar-cost averaging your investments, could prevent you from buying high and selling low. 

A quote that the book shared from the legendary investor, George Soros said, "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." 

The most important part of any plan is planning on your plan not going according to plan. Always be cautious and leave room for error. Room for error let's you endure a range of possible outcomes and it helps with your financial endurance, which is how long you're in the game and not completely thrown off by some financial catastrophe. 

Number six, getting money requires taking risks, being optimistic and putting yourself out there. But keeping money requires the opposite of taking risks. This paradox is something that makes sense after reading it, but it isn't an intuitive concept. 

In order to make money, one has to take risks and be optimistic. A young investor has to invest in stocks rather than bonds, in order to achieve a higher return. But that higher return means taking on more risk. An entrepreneur has to take the risk of building a brand new company, and trying to enter a brand new market, or enter an already competitive market. 

However, once your money is made and you're trying to keep that money, you no longer want to take as many risks. You want to do things that preserve your wealth or grow it without exposing yourself too much. 

This is why retirees tend to invest more in bonds than stocks because bonds have less risk associated with them. Once you have money, you'll need a level of humility and a bit of fear that everything that you've made could be taken away in the blink of an eye. 

Take away seven, if you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. This point is all about compound interest. 

The reason that Warren Buffet has achieved such incredible investing returns is because he started as a boy and continued for the whole duration of his life. The reasons individuals like Jeff Bezos or Elon Musk have amassed so much wealth, is because they were the original shareholders of their company and they've held onto those shares longer than anybody else in the company. 

The best thing you could do for your investing is to start as soon as possible. By doing this, you'll give yourself the longest time horizon. The book shares that you'll want to aim for pretty good returns that you could stick with for the longest period of time. 

Basically, just chase the steady returns of the market. Don't try to go for home runs and invest in super risky stocks because that might wipe you out. You want to be in the game for as long as possible. Finally, the eighth top takeaway. Beware of taking financial cues from people playing a different game than you. 

Every single individual out there is playing their own game with their finances. Investors have different goals, different time horizons, and come from different circumstances. 

And it's foolish to copy the financial cues of those that are playing a different game than you. If you're 25 years old with an entry-level salary and student debt, your investing behavior should be different than someone who is 40 and more financially well-off. 

An investment that may make sense for one person, could be completely ridiculous for another person. Keep this in mind when you're comparing yourself to others. Focus on your own path or at least look to inspiration from others who might come from the same situation and demographic as you. 

Those are the Top Eight Takeaways from the "Psychology of Money" by Morgan Housel. I highly recommend that you read it. Check the description for a link to my blog post, which gives a more in-depth review than what we went over today. And as a reminder to read this book.


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