The Psychology of Money
Feb 2023
3 min read
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1. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome.
2. You don’t need a specific reason to save. Saving for things that are impossible to predict or define is one of the best reasons to save.
3. Manage your money in a way that helps you sleep at night.
4. 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.
5. If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon.
6. Achieving some level of independence does not rely on earning a doctor’s income. It’s mostly a matter of keeping your expectations in check and living below your means. Independence, at any income level, is driven by your savings rate.
7. And past a certain level of income your savings rate is driven by your ability to keep your lifestyle expectations from running away.
8. Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret — all of which are easy to overlook until you’re dealing with them in real time.
9. Be 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 the outcomes.
10. Judging how you’ve done by focusing on individual investment makes winners look more brilliant than they were, and losers appear more regrettable than they should.
11. Use money to gain control over your time. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.
12. Define the cost of success and be ready to pay for it. Most financial costs don’t have visible price tags. Uncertainty, doubt and regret are common costs in the finance world. They are often worth paying. But you have to view them as fees rather than fines.
13. Worship room for error. A gap between what could happen in the future and what you need to happen in the future in order to do well is what gives you endurance and endurance is what makes compounding magic over time.
14. Avoid the extreme ends of financial decisions. Everyone’s goals and desires will change over time, and the more extreme your past decisions were the more you may regret them as you evolve.
15. You should like risk because it pays off over time. But you should be paranoid of ruinous risks because it prevents you from taking future risks that will pay off over time.
16. Define the game you’re playing, and make sure your actions are not being influenced by people playing a different game.
17. The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true.
18. Respect the mess. Smart, informed, and reasonable people can disagree in finance, because people have vastly different goals and desires. There is no single right answer; just the answer that works for you.
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PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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