The best quotes by the author we have brought to you
Academic finance is devoted to finding the mathematically optimal investment strategies. My own theory is that, in the real world, people do not want the mathematically optimal strategy. They want the strategy that maximizes for how well they sleep at night.
Morgan Housel
The Psychology of Money
“After spending years around investors and business leaders I’ve come to realize that someone else’s failure is usually attributed to bad decisions, while your own failures are usually chalked up to the dark side of risk.” (The Psychology of Money Quotes)
Morgan Housel
The Psychology of Money
“And short term traders operate in an area where the rules governing long-term investing particularly around valuation are ignored, because they’re irrelevant to the game being played.”
Morgan Housel
The Psychology of Money
“At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have… enough.”
Morgan Housel
The Psychology of Money
“Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
Morgan Housel
The Psychology of Money
Bubbles form when the momentum of short-term returns attracts enough money that the makeup of investors shifts from mostly long term to mostly short term.
Morgan Housel
The Psychology of Money
“But there’s only one way to stay wealthy: some combination of frugality and paranoia.”
Morgan Housel
The Psychology of Money
Compounding doesn’t rely on earning big returns. Merely good returns sustained uninterrupted for the longest period of time – especially in times of chaos and havoc – will always win.
Morgan Housel
The Psychology of Money
Compounding only works if you can give an asset years and years to grow. It’s like planting oak trees: A year of growth will never show much progress, 10 years can make a meaningful difference, and 50 years can create something absolutely extraordinary.
Morgan Housel
The Psychology of Money
Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable. Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters most when managing money.
Morgan Housel
The Psychology of Money
“Doing something you love on a schedule you can’t control can feel the same as doing something you hate.”
Morgan Housel
The Psychology of Money
Doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.
Morgan Housel
The Psychology of Money
Everything worth pursuing has less than 100% odds of succeeding, and risk is just what happens when you end up on the unfortunate side of that equation.
Morgan Housel
The Psychology of Money
Financial and investment planning are critical, because they let you know whether your current actions are within the realm of reasonable. But few plans of any kind survive their first encounter with the real world.
Morgan Housel
The Psychology of Money
“Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.”
Morgan Housel
The Psychology of Money
Getting money and keeping money are two different skills. Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping money requires the opposite of taking risk. It requires humility, and fear that what you’ve made can be taken away from you just as fast.
Morgan Housel
The Psychology of Money
Good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.
Morgan Housel
The Psychology of Money
“I love Voltaire’s observation that “History never repeats itself; man always does.”
Morgan Housel
The Psychology of Money
“I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.”
Morgan Housel
The Psychology of Money
“In theory people should make investment decisions based on their goals and the characteristics of the investment options available to them at the time. But that’s not what people do.”
Morgan Housel
The Psychology of Money
Investing is not a hard science. It’s a massive group of people making imperfect decisions with limited information about things that will have a massive impact on their wellbeing, which can make even smart people nervous, greedy and paranoid.
Morgan Housel
The Psychology of Money
“It’s not that any of these things are bad or wrong. It’s that knowing what to do tells you nothing about what happens in your head when you try to do it.” (The Psychology of Money Quotes)
Morgan Housel
The Psychology of Money
It gets dangerous when the taste of having more – more money, more power, more prestige – increases ambition faster than satisfaction. In that case one step forward pushes the goalpost two steps ahead. You feel as if you’re falling behind, and the only way to catch up is to take greater and greater amounts of risk.
Morgan Housel
The Psychology of Money
Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret – all of which are easy to overlook until you’re dealing with them in real time.
Morgan Housel
The Psychology of Money
Many bets fail not because they were wrong, but because they were mostly right in a situation that required things to be exactly right. Room for error – often called margin of safety – is one of the most underappreciated forces in finance. It comes in many forms: A frugal budget, flexible thinking, and a loose timeline – anything that lets you live happily with a range of outcomes.
Morgan Housel
The Psychology of Money
Money’s greatest intrinsic value – and this can’t be overstated – is its ability to give you control over your time. To obtain, bit by bit, a level of independence and autonomy that comes from unspent assets that give you greater control over what you can do and when you can do it.
Morgan Housel
The Psychology of Money
Most people, deep down, want to be wealthy. They want freedom and flexibility, which is what financial assets not yet spent can give you. But it is so ingrained in us that to have money is to spend money that we don’t get to see the restraint it takes to actually be wealthy. And since we can’t see it, it’s hard to learn about it.
Morgan Housel
The Psychology of Money
Most financial advice is about today. What should you do right now, and what stocks look like good buys today? But most of the time today is not that important. Over the course of your lifetime as an investor the decisions that you make today or tomorrow or next week will not matter nearly as much as what you do during the small number of days – likely 1% of the time or less – when everyone else around you is going crazy.
Morgan Housel
The Psychology of Money
“One of my deeply held investing beliefs is that there is little correlation between investment effort and investment results.”
Morgan Housel
The Psychology of Money
Only saving for a specific goal makes sense in a predictable world. But ours isn’t. Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.
Morgan Housel
The Psychology of Money
People’s ability to save is more in their control than they might think. Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you. As I argue often in this book, money relies more on psychology than finance.
Morgan Housel
The Psychology of Money
People want to become wealthier to make them happier. Happiness is a complicated subject because everyone’s different. But if there’s a common denominator in happiness – a universal fuel of joy – it’s that people want to control their lives. 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.
Morgan Housel
The Psychology of Money
Reputation is invaluable. Freedom and independence are invaluable. Family and friends are invaluable. Being loved by those who you want to love you is invaluable. Happiness is invaluable. And your best shot at keeping these things is knowing when it’s time to stop taking risks that might harm them. Knowing when you have enough.
Morgan Housel
The Psychology of Money
Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate.
Morgan Housel
The Psychology of Money
Savings without a spending goal gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. It lets you change course on your own terms. Every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself.
Morgan Housel
The Psychology of Money
“Some people are born into families that encourage education; others are against it. Some are born into flourishing economies encouraging of entrepreneurship; others are born into war and destitution.”
Morgan Housel
The Psychology of Money
The cornerstone of economics is that things change over time, because the invisible hand hates anything staying too good or too bad indefinitely.
Morgan Housel
The Psychology of Money
“The correct lesson to learn from surprises is that the world is surprising.”
Morgan Housel
The Psychology of Money
“The End of History Illusion is what psychologists call the tendency for people to be keenly aware of how much they’ve changed in the past, but to underestimate how much their personalities, desires, and goals are likely to change in the future.”
Morgan Housel
The Psychology of Money
The formation of bubbles isn’t so much about people irrationally participating in long-term investing. They’re about people somewhat rationally moving toward short-term trading to capture momentum that had been feeding on itself.
Morgan Housel
The Psychology of Money
The line between “inspiringly bold” and “foolishly reckless” can be a millimeter thick and only visible with hindsight.
Morgan Housel
The Psychology of Money
The most important economic events of the future – things that will move the needle the most – are things that history gives us little to no guide about. They will be unprecedented events. Their unprecedented nature means we won’t be prepared for them, which is part of what makes them so impactful. This is true for both scary events like recessions and wars, and great events like innovation.
Morgan Housel
The Psychology of Money
The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won’t wipe you out so you can keep playing until the odds fall in your favor.
Morgan Housel
The Psychology of Money
There are a million ways to get wealthy, and plenty of books on how to do so. But there’s only one way to stay wealthy: some combination of frugality and paranoia. And that’s a topic we don’t discuss enough.
Morgan Housel
The Psychology of Money
There are professional investors who grind 80 hours a week to add a tenth of a percentage point to their returns when there are two or three full percentage points of lifestyle bloat in their finances that can be exploited with less effort.
Morgan Housel
The Psychology of Money
There is never a moment when you’re so right that you can bet every chip in front of you. The world isn’t that kind to anyone – not consistently, anyways. You have to give yourself room for error. You have to plan on your plan not going according to plan.
Morgan Housel
The Psychology of Money
There is no greater force in finance than room for error, and the higher the stakes, the wider it should be.
Morgan Housel
The Psychology of Money
There is no reason to risk what you have and need for what you don’t have and don’t need. It’s one of those things that’s as obvious as it is overlooked.
Morgan Housel
The Psychology of Money
“Things that have never happened before happen all the time.”
Morgan Housel
The Psychology of Money
“To make money they didn’t have and didn’t need, they risked what they did have and did need. And that’s foolish. It is just plain foolish. If you risk something that is important to you for something that is unimportant to you, it just does not make any sense.”
Morgan Housel
The Psychology of Money
Uncertainty, randomness, and chance – “unknowns” – are an ever-present part of life. The only way to deal with them is by increasing the gap between what you think will happen and what can happen while still leaving you capable of fighting another day.
Morgan Housel
The Psychology of Money
“Warren Buffett’s net worth is $84.5 billion. Of that, $84.2 billion was accumulated after his 50th birthday.”
Morgan Housel
The Psychology of Money
Wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later. Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.
Morgan Housel
The Psychology of Money
When most people say they want to be a millionaire, what they might actually mean is “I’d like to spend a million dollars.” And that is literally the opposite of being a millionaire.
Morgan Housel
The Psychology of Money
Whether an investing strategy will work, and how long it will work for, and whether markets will cooperate, is always in doubt. Results are shrouded in uncertainty. Personal savings and frugality are parts of the money equation that are more in your control and have a 100% chance of being as effective in the future as they are today.
Morgan Housel
The Psychology of Money
“Years ago I asked economist Robert Shiller, who won the Nobel Prize in economics, “What do you want to know about investing that we can’t know?” “The exact role of luck in successful outcomes,” he answered.”
Morgan Housel
The Psychology of Money
“You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.”
Morgan Housel
The Psychology of Money
You can plan for every risk except the things that are too crazy to cross your mind. And those crazy things can do the most harm, because they happen more often than you think and you have no plan for how to deal with them.
Morgan Housel
The Psychology of Money
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