Today’s show is aimed at helping you become a better investor, entrepreneur, or business person with the help of the wealth lessons in Morgan Housel’s book, The Psychology of Money.
Rather than property or finance strategies, Housel’s book is about the principles of behavioural finance.
Understanding the effects of psychology on investors and financial markets can give you important insights and help you overcome the biases that are holding you back.
Listen in as Mark Creedon and I explore quotes from Housel’s book and explain why investors sometimes seem to make bad decisions or work against themselves, and how you can avoid falling into these pitfalls. We’ll cover each chapter over two episodes of the Michael Yardney Podcast
Insights from The Psychology of Money
Wealth is more than just assets, and staying wealthy is not the same thing as getting wealthy and requires its own set of skills.
Overall, the message of The Psychology of Money is that your behavior, and the psychology behind your behavior, have more to do with how successful you are with money than how smart you are.
Mark and I share our thoughts about the premise of each chapter and break down the important points.
- Personal history and biases significantly shape financial decisions.
- “Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.”
- Luck and risk are more similar to each other than you may realize. This means you need to be careful who you admire.
- “Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort.”
- Having a perspective on what constitutes enough can prevent the trap of endlessly pursuing more, which can lead to regrets.
- “Life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.”
- The secret of compounding is time. It’s not necessarily important to make the biggest return right away, but it is important to give compounding time to work its magic.
- “If something compounds—if a little growth serves as the fuel for future growth—a small starting base can lead to results so extraordinary they seem to defy logic. It can be so logic-defying that you underestimate what’s possible, where growth comes from, and what it can lead to.”
- Wealth accumulation often starts with high risk and transitions to conservative strategies for preservation. Once you have wealth, the important thing is not to lose it.
- “There are a million ways to get wealthy … but there’s only one way to stay wealthy: some combination of frugality and paranoia.”
- Small things can have long tails that end up creating a big impact.
- “A lot of things in business and investing work this way. Long tails—the farthest ends of a distribution of outcomes—have tremendous influence in finance, where a small number of events can account for the majority of outcomes. “
- True wealth provides autonomy over your time and leads to genuine happiness.
- “The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays. “
- Social perceptions of wealth can be deceptive, with true wealth often being the unseen reserves.
- “No one is impressed with your possessions as much as you are.”
- Wealth is not merely what is visible, such as possessions, but also the unspent savings and investments.
- “Spending money to show people how much money you have is the fastest way to have less money.”
Understanding and controlling your biases and worldviews is crucial for successful investing and wealth management.
Whether you’re an experienced investor or just a beginner, you’ll be able to gain helpful insights from today’s show.
Links and Resources:
Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us
Why not join Metropole’s Mastermind Business Accelerator
Learn more about Mark Creedon – Business Coach to some of Australia’s leading entrepreneurs
Get a copy of Mark’s new book here – Have a Business not a Job
Subscribe to Mark’s Mastermind for Business Podcast here
Get a bundle of eBooks and reports – www.PodcastBonus.com.au
Join us at Wealth Retreat 2024 – find out more and register your interest – www.WealthRetreat.com.au
Some of our favorite quotes from the show:
“All you've got to do is copy that small group of people who do achieve it, so people are just stuck in their own way of thinking. They've got these biases that I guess we've talked about before.” – Michael Yardney
“But once you've built your wealth, then you should not be taking as much risk.” – Michael Yardney
“So, money gave me control of what I can do and what I want to do. It also gives me control of the people I want to be with, I guess in that way it does make you happy.”— Michael Yardney
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