No one on the Forbes 400 list of richest Americans can be described as a “perma-bear.” A natural sense of optimism not only healthy, but vital.
—Morgan Housel
Billionaire investor Ray Dalio once said, “The more you think you know, the more closed-minded you’ll be.” Repeat this line to yourself the next time you’re certain of something.
—Morgan Housel
There is a strong correlation between knowledge and humility. The best investors realize how little they know.
—Morgan Housel
There’s a strong correlation between knowledge and humility. People who spend 10 minutes on Google studying monetary policy think they have it all figured out, while people with Ph.D.s and decades of experience throw up their hands in frustration. The more you study economics, the more you realize how little we know about it.
—Morgan Housel
People are twice as biased as they think they are, which is precisely why biases are dangerous.
—Morgan Housel
Short-term thinking is at the root of most of our problems, whether it’s in business, politics, investing, or work.
—Morgan Housel
Several studies have shown that people prefer a pundit who is confident to one who is accurate. Pundits are happy to oblige.
—Morgan Housel
Not a single person in the world knows what the market will do in the short run.
—Morgan Housel
Focus on not getting beat by the market before you think about trying to beat it.
—Morgan Housel
In 1989, the CEOs of the seven largest U.S. banks earned an average of 100 times what a typical household made. By 2007, more than 500 times. By 2008, several of those banks no longer existed.
—Morgan Housel
Two things make an economy grow: population growth and productivity growth. Everything else is a function of one of those two drivers.
—Morgan Housel
Companies that focus on their stock price will eventually lose their customers. Companies that focus on their customers will eventually boost their stock price. This is simple, but forgotten by countless managers.
—Morgan Housel
The Financial Times wrote, “In 2008 the three most admired personalities in sport were probably Tiger Woods, Lance Armstrong and Oscar Pistorius.” The same falls from grace happen in investing. Chose your role models carefully.
—Morgan Housel
Investment bank Dresdner Kleinwort looked at analysts’ predictions of interest rates, and compared that with what interest rates actually did in hindsight. It found an almost perfect lag. “Analysts are terribly good at telling us what has just happened but of little use in telling us what is going to happen in the future,” the bank wrote. It’s common to confuse the rearview mirror for the windshield.
—Morgan Housel
Obvious things escape attention because attention is drawn to what it wants to see, or what it thinks makes the biggest difference, which often isn’t the obvious things because obvious things are viewed as too simple to make a difference.
—Morgan Housel
You are under no obligation to read or watch financial news. If you do, you are under no obligation to take any of it seriously.
—Morgan Housel
A money manager’s amount of experience doesn’t tell you much. You can underperform the market for an entire career. Many have.
—Morgan Housel
Self-interest is the most powerful force in the world. People in unethical, predatory, and nonsense jobs will do mental gymnastics to convince themselves they’re doing the right thing. Those who criticize the behavior of “greedy Wall Street bankers” underestimate their tendency to do the same thing if offered an eight-figure salary.
—Morgan Housel
Study successful investors, and you’ll notice a common denominator: they are masters of psychology. They can’t control the market, but they have complete control over the gray matter between their ears.
—Morgan Housel
The best company in the world run by the smartest management can be a terrible investment if purchased at the wrong price.
—Morgan Housel
When most people say they want to be a millionaire, what they really mean is “I want to spend $1 million,” which is literally the opposite of being a millionaire.
—Morgan Housel
Our memories of financial history seem to extend about a decade back. “Time heals all wounds,” the saying goes. It also erases many important lessons.
—Morgan Housel
Saying “I’ll be greedy when others are fearful” is easier than actually doing it.
—Morgan Housel
Change is as rapid as it is unpredictable.
—Morgan Housel
As Nate Silver writes, “When a possibility is unfamiliar to us, we do not even think about it.” The biggest risk is always something that no one is talking about, thinking about, or preparing for. That’s what makes it risky.
—Morgan Housel
Having more than you need can be a liability masquerading as an advantage, and no sense of “enough” can look like ambition but often leads you over the edge.
—Morgan Housel
Dean Williams once noted that “Expertise is great, but it has a bad side effect: It tends to create the inability to accept new ideas.” Some of the world’s best investors have no formal backgrounds in finance—which helps them tremendously.
—Morgan Housel
Do nothing are the two most powerful—and underused—words in investing. The urge to act has transferred an inconceivable amount of wealth from investors to brokers.
—Morgan Housel
The single most important investment question you need to ask yourself is, “How long am I investing for?” How you answer it can change your perspective on everything.
—Morgan Housel
How long you stay invested for will likely be the single most important factor determining how well you do at investing.
—Morgan Housel
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