Page 197 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

others. Respect the power of luck and risk and you’ll have a better
chance of focusing on things you can actually control. You’ll also have a
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better chance of finding the right role models.

Less ego, more wealth. Saving money is the gap between your ego and

your income, and wealth is what you don’t see. So wealth is created by
suppressing what you could buy today in order to have more stuff or
more options in the future. No matter how much you earn, you will
never build wealth unless you can put a lid on how much fun you can
have with your money right now, today.

Manage your money in a way that helps you sleep at night. That’s
different from saying you should aim to earn the highest returns or
save a specific percentage of your income. Some people won’t sleep well

unless they’re earning the highest returns; others will only get a good
rest if they’re conservatively invested. To each their own. But the
foundation of, “does this help me sleep at night?” is the best universal
guidepost for all financial decisions.

If you want to do better as an investor, the single most powerful thing
you can do is increase your time horizon. Time is the most powerful

force in investing. It makes little things grow big and big mistakes fade
away. It can’t neutralize luck and risk, but it pushes results closer
towards what people deserve.

Become OK with a lot of things going wrong. You can be wrong half the
time and still make a fortune, because a small minority of things
account for the majority of outcomes. No matter what you’re doing
with your money you should be comfortable with a lot of stuff not
working. That’s just how the world is. So you should always measure

how you’ve done by looking at your full portfolio, rather than
individual investments. It is fine to have a large chunk of poor
investments and a few outstanding ones. That’s usually the best-case
scenario. Judging how you’ve done by focusing on individual
investments makes winners look more brilliant than they were, and
losers appear more regrettable than they should.