Psychology of Money

… Lessons on Investing & investor behavior

Good Read for the beginners, lessons reiterated for investors. Focusing on basic rules of investment and investment behavior with impactful examples.

Key highlights/lessons from the book:

• Start investing early, more you delay more you degrow.
• Experience is Learning, it should make you better investor instead of defining your constraints and boundaries.
  • Experience and sentiment of first trade become investor’s Psychology. Let it not be the only driving factor in all your future investments, as experience in first trade define the sentiment you carry for rest of life.
  • Wrong decision should always lead to learning, not to fear. Mistakes in investing is step towards successful investing, will make you more prudent.

“Fail & Gain can be moral for many”. Fear restricts you, but learning makes you better investor.  

• Compounding works on money saved and spent:
  • Benefits of Money invested are visible more in long terms. Hence, hold your breath and keep patience once invested. Nothing changes overnight.
  • It also works on money spent, hence spend prudently. Every penny we spend reduces our wealth we have TODAY and Tomorrow (Penny Spend * (1+I)^n…..

“Hence Savings & Investments are two important principles of wealth creation”.

• World evolves, Dynamics/situation of any investor is not constant and also individual needs changes over period.
  • Historians are not Prophet. World is full of surprises & goes through Structural Changes. Theories based on past fails because of surprise element that may come along at any point in time.
  • World and Circumstances changes over the period, Financial Planning should avoid extreme situation.
  • There is gap in Spreadsheet and Real life, be reasonable investor.
  • Avoid Excuse “This time is Different”.

“Investment should be blend of evolution with past data points.”

• Earning wealth is easier than safeguarding the same.  Saving & growing of wealth takes more acumen. Protect wealth earned from
  •  Greed
  •  Bad advice.  

“Preserving wealth takes more than earning wealth, protect wealth from two key enemies.”

• There is Price of Investing only tags are missing, volatility is fee we pay for period. Find the price and absorb volatility. As investor important to understand the “Money Psychology” … wealth creation and preservation will follow.
• Investing is not about just following the rules, be a “Reasonable investor with Tadka of Rationality”.

Understand the “Money Psychology” to be successful investor.