Page 117 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

This is not traditional advice. It’s almost a badge of honor for investors to
claim they’re emotionless about their investments, because it seems
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rational.

But if lacking emotions about your strategy or the stocks you own increases

the odds you’ll walk away from them when they become difficult, what
looks like rational thinking becomes a liability. The reasonable investors
who love their technically imperfect strategies have an edge, because
they’re more likely to stick with those strategies.

There are few financial variables more correlated to performance than
commitment to a strategy during its lean years—both the amount of
performance and the odds of capturing it over a given period of time. The
historical odds of making money in U.S. markets are 50/50 over one-day

periods, 68% in one-year periods, 88% in 10-year periods, and (so far)
100% in 20-year periods. Anything that keeps you in the game has a
quantifiable advantage.

If you view “do what you love” as a guide to a happier life, it sounds like
empty fortune cookie advice. If you view it as the thing providing the
endurance necessary to put the quantifiable odds of success in your favor,

you realize it should be the most important part of any financial strategy.

Invest in a promising company you don’t care about, and you might enjoy it
when everything’s going well. But when the tide inevitably turns you’re
suddenly losing money on something you’re not interested in. It’s a double
burden, and the path of least resistance is to move onto something else. If
you’re passionate about the company to begin with—you love the mission,
the product, the team, the science, whatever—the inevitable down times
when you’re losing money or the company needs help are blunted by the

fact that at least you feel like you’re part of something meaningful. That can
be the necessary motivation that prevents you from giving up and moving
on.

There are several other times when it’s fine to be reasonable instead of
rational with money.