Bestselling author Morgan Housel teaches five important money lessons

Morgan Housel authored a best-selling book in which he teaches new investors a variety of financial lessons. We choose five of them and repeat the process. More information is available here

Abeer Ray
25 Nov 2022
Bestselling author Morgan Housel teaches five important money lessons

New Delhi: Understanding what the masters are saying is critical for a new investor. Morgan Housel is a partner at The Collaborative Fund and a former columnist for The Motley Fool and The Wall Street Journal. She is the bestselling author of The Psychology of Money. His book has already sold over 2 million copies and has been translated into 49 languages.

The author shares a number of valuable investing and money lessons for first-time investors through his hard-hitting philosophy enshrined in the book. We elaborate on these lessons:

There is only one way to stay wealthy

There are numerous ways to become wealthy, but there is “only one way to stay wealthy, namely a combination of frugality and paranoia”.

To make money, one must learn to take risks, whereas to keep it, one must learn to be frugal. The goal is to ensure that you do not lose your money by taking a variety of risks and actions.

Don’t overanalyse your success and failures

It is said that in victory, one should be humble, and in defeat, one should be compassionate. This is because it is never as good or as bad as it appears.

He claims that the overall outcome of a specific action is influenced by a number of factors. Rather than the efforts of a single person, the outcome of someone's actions is guided by a number of forces. The world is far too complicated to let 100% of your actions determine 100 per cent of your results.

Focus on your goals

Getting the goalpost to stop moving is the most difficult financial skill. In other words, you knew what you were aiming for when you set your financial goal. And, after a period of time, i.e., after reaching your goal, you should stop saving and investing at the same rate.

This is an important lesson to remember, especially for FIRE enthusiasts (Financial Independence and Retire Early). For example, if you have already met your FIRE goal, there is no reason to continue your investment journey.

Understand compounding effect

It's critical to remember that good investing isn’t about getting the best returns because the best returns are one-time occurrences that can’t be repeated.

The legendary investor Warren Buffet once stated that $81.5 billion of his $84.5 billion net worth came after he turned 65. These high returns are only possible by investing and remaining invested. In other words, the power of compounding enables investors to build wealth over time.

Wealth is intangible

Wealth is actually money that you can't see. This means that if someone owns a car worth ten lakh rupees, we assume he is wealthy. He may, however, have ten times the wealth that he chooses not to spend or flaunt. So, actual wealth is money that you have chosen not to spend on material possessions.

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