Written by Tom Stanley, Investment Adviser, 17th November 2022
Over recent months I have written notes that have been a little chewier than I had intended. My original focus for these notes was to help our clients keep perspective by observing and commenting on the natural emotions and psychological biases experienced by all investors…
But the constant flow of attention grabbing headlines this year had me diving into the nuances of inflation, volatility, cashflow management, and more – not this month.
A note by Morgan Housel, Partner of Collab Fund and author of “The Psychology of Money” caught my attention, and prompted me to drop the graphs/charts this month and keep things a little lighter. Morgan’s note ‘Little Rules About Big Things’ is definitely worth a read, but below are some of the ‘little rules’ that resonated with me.
Morgan’s note starts with “A few things I’ve come to terms with:”
Having no FOMO might be the most important investing skill.
If your expectations grow faster than your income, you’ll never be happy with your money no matter how much you accumulate.
A big takeaway from economic history is that the past wasn’t as good as you remember, the present isn’t as bad as you think, and the future will be better than you anticipate.
Every past decline looks like an opportunity and every future decline looks like a risk.
Comedians are the only good thought leaders because they understand how the world works but they want to make you laugh rather than make themselves feel smart.
Getting rich and staying rich are different things that require different skills.
Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works.
Most financial mistakes come when you try to force things to happen faster than is required. Compounding doesn’t like when you try to use a cheat code.
If you have an idea but think “someone has already done that,” just remember there are 1,010 published biographies of Winston Churchill.
No one is thinking about you as much as you are.
Risk’s greatest fuels are leverage, overconfidence, ego, and impatience. Its greatest antidote is having options, humility, and other people’s trust.
Once-in-a-century events happen all the time because lots of unrelated things can go wrong. If there’s a 1% chance of a new disastrous pandemic, a 1% chance of a crippling depression, a 1% chance of a catastrophic flood, a 1% chance of political collapse, and on and on, then the odds that something bad will happen next year – or any year – are … pretty good. It’s why Arnold Toynbee says history is “just one damn thing after another.”
The same traits needed for outlier success are the same traits that increase the odds of failure. The line between bold and reckless is thin. So be careful blindly praising successes or criticizing failures, as they often made similar decisions with slightly different levels of luck.
People learn when they’re surprised. Not when they read the right answer, or are told they’re doing it wrong, but when they experience a gap between expectations and reality.
Everything is sales.
If any of these rules resonated with you too, or prompted you to think about your world view or situation, GREAT – Just remember, we are invested alongside you, and here to help.
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