Psychology of Money

March 28, 2022

If you are struggling with the psychological aspects of investing and personal finance in general, Morgan Housel wrote an insightful article on the subject in 2018, entitled The Psychology of Money. It was so successful, he later expanded its ideas into a bestselling book covering the same ground, more or less. Article highlights:

  • The social utility of money comes at the direct expense of growing money: Wealth is what you don’t see.
  • Rich man in the car paradox.
  • Under-appreciating the power of compounding, driven by the tendency to intuitively think about exponential growth in linear terms.
  • Optimism bias in risk-taking, or “Russian Roulette should statistically work” syndrome: An over attachment to favorable odds when the downside is unacceptable in any circumstance.

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