{"id":53,"date":"2018-06-19T09:19:16","date_gmt":"2018-06-19T16:19:16","guid":{"rendered":"https:\/\/www.mrmd.com\/blog\/?p=53"},"modified":"2018-06-19T09:23:39","modified_gmt":"2018-06-19T16:23:39","slug":"article-the-psychology-of-money","status":"publish","type":"post","link":"https:\/\/www.mrmd.com\/blog\/2018\/06\/19\/article-the-psychology-of-money\/","title":{"rendered":"Article: The Psychology of Money"},"content":{"rendered":"

http:\/\/www.collaborativefund.com\/blog\/the-psychology-of-money\/<\/a><\/p>\n

This is a fascinating article which isn\u2019t so much about the psychology of money per se, as it is about about the psychology of *investing* and how you can better apply that in your own efforts at such.<\/p>\n

The premise is that a person who – on the basis of education, degrees, awards, etc in the field of finance – might be expected to know a LOT about investing, can and often will end up *significantly* worse financially than someone who has no such background, but who quietly invests modest amounts slowly but consistently over many years.<\/p>\n

And the bottom line is that long-term success in investing is more a result of favorable psychology and behavior than it is about having an in-depth understanding of things like finances, financial markets, economics, and such – successful investing is mostly about how people behave with money, which is more complex and nuanced than can be reduced to algorithms, calculations, and formulas.<\/p>\n

The takeaway isn\u2019t necessarily a new idea: essentially, as early as you can, realize and trust the power of compounding. [So listen up, me from the early 2000\u2019s! Oh wait, that\u2019s not how time works.\ud83d\ude2d] But it tries to explain why this is so hard to do, especially in today\u2019s world of finances as entertainment.<\/p>\n

The article goes on to list TWENTY \u201cflaws, biases, and causes of bad behavior [that] pop up often when people deal with money\u201d … it\u2019s a super long read (set aside half an hour!) but you could probably skim the 20 things and get the gist of it, which essentially is: \u201cdon\u2019t just do something, stand there!\u201d (and also: compounding).<\/p>\n

A few thoughts from the article that resonated with me:<\/p>\n

– \u201cThe finance industry talks too much about what to do, and not enough about what happens in your head when you try to do it … The true cost of investing is rarely the financial fee that is easy to see and measure. It\u2019s the emotional and physical price demanded by markets that are pretty efficient.\u201d<\/p>\n

– \u201cThe point isn\u2019t to abandon the pursuit of wealth … it\u2019s recognizing that people generally aspire to be respected by others, and humility, graciousness, intelligence, and empathy tend to generate more respect than fast cars.\u201d<\/p>\n

– \u201cA hard reality is that what often matters most in finance will never win a Nobel Prize: Humility and room for error.\u201d<\/p>\n

– \u201cWe tend to judge wealth by what we see. We can\u2019t see people\u2019s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success. Cars. Homes. Vacations. Instagram photos. But wealth, in fact, is what you don\u2019t see. It\u2019s the cars not purchased. The diamonds not bought. The renovations postponed, the clothes forgone and the first-class upgrade declined. It\u2019s assets in the bank that haven\u2019t yet been converted into the stuff you see … but they come at the direct expense of showing people how much wealth you have with material stuff.\u201d<\/p>\n

– \u201cPersonal finance is deeply personal, and one of the hardest parts is learning from others while realizing that their goals and actions might be miles removed from what\u2019s relevant to your own life.\u201d<\/p>\n

– \u201cIf there\u2019s a common denominator in these, it\u2019s a preference for humility, adaptability, long time horizons, and skepticism of popularity around anything involving money. Which can be summed up as: Be prepared to roll with the punches.\u201d<\/p>\n

http:\/\/www.collaborativefund.com\/blog\/the-psychology-of-money\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

http:\/\/www.collaborativefund.com\/blog\/the-psychology-of-money\/ This is a fascinating article which isn\u2019t so much about the psychology of money per se, as it is about about the psychology of *investing* and how you can better apply that in your own efforts at such. The premise is that a person who – on the basis of education, degrees, awards, etc […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[4,5],"class_list":["post-53","post","type-post","status-publish","format-standard","hentry","category-interesting-articles","tag-investing","tag-psychology"],"_links":{"self":[{"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/posts\/53","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/comments?post=53"}],"version-history":[{"count":5,"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/posts\/53\/revisions"}],"predecessor-version":[{"id":58,"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/posts\/53\/revisions\/58"}],"wp:attachment":[{"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/media?parent=53"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/categories?post=53"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mrmd.com\/blog\/wp-json\/wp\/v2\/tags?post=53"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}