Latest news with #ThePsychologyofMoney
CNBC
5 days ago
- Business
- CNBC
'A lot' of 'high IQ' people make this investing mistake, says money psychology expert—Warren Buffett agrees on what to do instead
It's natural to feel like being a good investor means coming up with a complicated strategy that maximizes returns, Morgan Housel, author of "The Psychology of Money," said on a recent episode of The Burnouts podcast. But that perspective is likely holding you back from long-term financial gains, he said. "A lot of people in investing, particularly smart people ... high IQ, high educated people, are like, 'Let's try to make this as complicated as we possibly can,' and they do," Housel said. But when it comes to investing, "the more complicated you make it, the worse you're probably going to do." Instead of chasing hot stocks or trying to time the market, the smartest approach to investing is making it as "brainless and simple and boring as you can," Housel said. "If you can be an average investor for an above-average period of time, like just earn average market returns every year for the next 20 years, you'll do amazing," Housel said. "The simple people who can be simple and average for 50 years are the ones who end up doing the best." One of the best tools for this approach is a low-cost index fund, which tracks a market index like the S&P 500 and aims to replicate its performance. Considering that even the world's most seasoned money managers struggle to consistently beat their benchmark indexes, investing to merely keep pace with the market is a savvy, low-effort approach, says Ben Smith, a certified financial planner and founder of Cove Financial Planning in Milwaukee, Wisconsin. It might feel more exciting to try to chase the highest returns possible, but chances are, that probably won't get you closer to your long-term goals than staying consistent with a low-cost index fund, he says. "I kind of joke to my clients, if investing is fun and sexy, you're probably doing something wrong," Smith says. "It should be kind of boring, it should be pretty easy ... You don't have to pick and choose different stocks and be really strategic, because that often doesn't work out very well, at least for most investors." Data indicates the same: Between January 2015 and December 2024, only 7% of active mutual fund managers beat their average passive rival, according to Morningstar. Warren Buffett, chairman of Berkshire Hathaway and one of the world's most successful stock market investors, has long been a proponent of passive investing. In a 1993 letter to shareholders, he wrote, "by periodically investing in an index fund ... the know-nothing investor can actually outperform most investment professionals." On CNBC's On the Money in 2017, Buffett reiterated similar advice: Most investors shouldn't focus on picking "the right company," he said, but rather they should consistently buy all the big companies through the S&P 500 in a "very, very low-cost way." Ultimately, owning a diversified portfolio of low-cost index funds, and holding onto them for as long as you can, will make "the most sense practically all of the time," Buffett said. Smith agrees. Beyond being easier to manage than a collection of individual stocks, index funds and exchange-traded funds enable you to harness the historical upward trend of the market, while reducing the risk that a decline in any single investment could derail your portfolio's returns. Plus, when you're choosing a strategy that's low-effort and won't pressure you to constantly check the market or second-guess your selections, it'll be easier to stick by your investments for the long haul. To Housel, that's most important for achieving your long-term goals. "The question you want to ask when investing is not, 'What are the highest returns that I can earn?'" Housel said. Rather, "What returns can I keep going for the longest period of time?" Of course, it's always smart to check in with your own financial advisor before making any changes to your portfolio.
News18
23-07-2025
- Business
- News18
10 Must-Read Books That Will Transform The Way You Manage Money
Money management is essential but rarely taught. The right books offer timeless insights and practical tips for every stage of your financial journey. Understanding how to manage money is a crucial life skill, yet it's often overlooked in traditional education. Whether you're just starting your financial journey or looking to sharpen your investment strategies, the right books can offer timeless wisdom and practical tools. Here's a carefully curated list of ten must-read money-management books that provide valuable insights on saving, investing, budgeting and building long-term wealth. This bestselling classic contrasts the financial philosophies of two father figures—one highly educated but financially unsuccessful, and the other a school dropout who built a business empire. Through compelling storytelling, Kiyosaki teaches readers how to adopt a mindset focused on asset-building and financial independence. The book challenges conventional views on work, education, and money, offering lessons that are as relevant today as ever. I Will Teach You to Be Rich by Ramit Sethi Tailored for readers in their 20s and 30s, this practical guide offers a no-nonsense, step-by-step plan to achieve financial success. Ramit Sethi breaks down personal finance into four key pillars—banking, saving, investing, and budgeting—while encouraging readers to automate their finances and spend consciously. It's an empowering read for millennials aiming to build wealth while still enjoying life. Dave Ramsey provides a structured approach to taking control of your finances through his 'baby steps" strategy. Packed with real-life success stories, this book is ideal for anyone looking to eliminate debt, build savings, and develop healthy money habits. Ramsey emphasises discipline, planning and commitment—core values that drive long-term financial transformation. The Psychology of Money by Morgan Housel Housel's book explores the emotional and psychological factors that influence our financial decisions. Using 19 thought-provoking stories, he reveals that managing money well is less about intelligence and more about behaviour. This insightful read sheds light on why people often make irrational financial choices—and how to avoid them. The Intelligent Investor by Benjamin Graham Widely regarded as the definitive guide to value investing, this classic by Benjamin Graham teaches readers how to navigate market fluctuations and avoid emotional investing. Rather than offering tips for beating the market, Graham focuses on principles like 'margin of safety" and long-term thinking. The book includes commentary that applies his timeless lessons to modern investment scenarios. The Richest Man in Babylon by George S Clason Set in ancient Babylon, this enduring classic delivers financial wisdom through a series of engaging parables. Clason offers simple yet powerful lessons on saving, investing and managing debt. Its timeless principles continue to resonate with readers seeking to build wealth through disciplined habits and smart decision-making. The Millionaire Next Door by Thomas J Stanley & William D Danko This eye-opening book reveals that most millionaires don't live flashy lifestyles. Instead, they practice frugality, invest wisely and live below their means. Stanley and Danko provide research-backed insights into the spending and saving habits of America's wealthy, debunking myths and offering a roadmap to financial success. The Little Book of Common Sense Investing by John C Bogle In this compact yet powerful guide, Vanguard founder John Bogle champions the benefits of low-cost index fund investing. He argues that the most effective way to grow wealth is through long-term, passive strategies rather than frequent trading. This is an essential read for anyone looking to build a solid, low-risk investment portfolio. The Simple Path to Wealth by JL Collins Originally written as a letter to his daughter, this book breaks down financial independence into easy-to-understand concepts. J.L. Collins emphasises the power of saving, frugality and investing in low-fee index funds. His straightforward advice makes it an excellent choice for those new to managing money or pursuing early retirement. Your Money or Your Life by Vicki Robin & Joe Dominguez This transformative book challenges readers to rethink their relationship with money. Robin and Dominguez promote a values-driven approach to spending, urging individuals to align their financial choices with their life goals. The book also introduces tools for tracking income and expenses to help readers achieve financial independence and greater life satisfaction. About the Author Business Desk A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover More Location : Delhi, India, India First Published: July 23, 2025, 11:58 IST Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
Forbes
17-07-2025
- Business
- Forbes
Luck Versus Skill: Truths Every Investor Needs To Know
Rodolfo Delgado is a Mexican Architect who loves New York City, real estate and tech. He's the CEO of Replay Listings. When people talk about investing, particularly in real estate, the conversations usually gravitate toward topics like property selection, market timing or financing options. Rarely do I hear people discuss two less obvious yet profoundly influential factors: the power of compounding and the dual forces of luck and risk. After spending over a decade in real estate and entrepreneurship, I've learned the true value in how these elements intersect and shape long-term investment outcomes. Let's dive deeper into these concepts and explore how understanding them can significantly improve your investment strategy. The Silent Force Behind Real Estate Growth Many have called compound interest the "eighth wonder of the world," and while real estate doesn't always deal directly with interest, it absolutely benefits from compounding growth. Simply put, compounding in real estate refers to how property values and income can increase exponentially over time when profits are reinvested. For example, early in my career, I witnessed a client purchase a modest apartment building in New York. At first glance, the building didn't seem remarkable; it had average returns and required routine maintenance. However, by reinvesting the rental income to make strategic improvements, my client incrementally increased rent and, subsequently, property value over several years. Eventually, the property appreciated substantially, far exceeding initial projections. As can be seen, even minor reinvestments can lead to outsized returns over time. To leverage this compounding effect, my advice is straightforward: Resist the temptation to quickly cash out on real estate profits. Instead, consistently reinvest a portion of your returns into enhancing your property or diversifying into similar assets. It's a simple yet effective method to accelerate long-term growth. Recognizing Luck And Risk Early in my real estate career, I experienced firsthand how easily luck can masquerade as skill. Shortly after entering the market (about a decade ago), I facilitated a transaction for a property in an emerging neighborhood in Manhattan. Within a few years, the opening of prominent stores turned the area into a much more desirable destination, skyrocketing property values. At the time, I credited myself entirely, thinking I had cleverly foreseen the market's future. Looking back, however, luck played a substantial role in that success, as the changes driving value were beyond my control or prediction. The truth is, I was lucky. In his book, The Psychology of Money, Morgan Housel brilliantly distinguishes between luck and risk. He defines luck as the positive outcome of events largely beyond our control, while risk refers to the opposite—the negative outcomes that come from similarly uncontrollable factors. Both play significant roles in investment outcomes, but few investors consciously account for their impact. My actionable advice here is twofold. First, remain humble and objective: When things go well, acknowledge the role luck may have played. Doing so helps avoid complacency and reckless optimism. Secondly, manage risk by diversifying across property types, locations and strategies. Recognizing that negative, unpredictable events can and do occur, thoughtful diversification ensures no single uncontrollable event can derail your entire portfolio. Allowing Time To Unlock Value One of the biggest lessons I've learned as an investor is the incredible value of patience. Real estate investing, unlike some quick-turn strategies, typically rewards those who maintain a longer-term vision. Just as with compounding, letting investments mature over time significantly enhances returns. Take my company's urban development ventures in Mexico as an example. We specialize in acquiring land on the city outskirts, bringing in essential services like roads, water and electricity, and then subdividing these large parcels into smaller, affordable plots ideal for small businesses and individual investors. Our investors who experience the greatest returns are consistently those who patiently hold their land, watching its value appreciate as the city inevitably expands outward. This highlights an important piece of advice: Before purchasing property, clearly define your investment horizon. When you enter an investment knowing it's designed to grow in value over a five- or 10-year timeframe, you'll be less tempted by short-term fluctuations or impulsive selling decisions. Patience in real estate isn't just a virtue; it's a strategic advantage. Using Uncertainty To Your Advantage Periods of volatility often reveal valuable opportunities. Real estate markets experience cycles, and downturns are natural parts of the investing journey. The key is not to avoid volatility altogether but to use it as an opportunity for strategic acquisition or consolidation. During the market uncertainty following the 2008 financial crisis and more recently during the pandemic, savvy investors carefully acquired undervalued properties in prime locations. They weren't speculating; they were strategically purchasing assets that met their long-term criteria, knowing full well the market would eventually rebound. When investing in real estate, it is essential to establish criteria and conditions beforehand that will guide your decisions during turbulent times. When uncertainty hits, you can move quickly, confidently acquiring quality assets at favorable terms. Embracing volatility as part of your investment strategy transforms market downturns from moments of panic into opportunities for strategic growth. Playing The Long Game Great investors aren't necessarily those who pick the perfect property at the perfect time. They're investors who deeply understand the value of compounding and appreciate (and recognize) the roles that luck and risk play. As you move forward in your real estate journey, continually remind yourself of these silent but powerful influences. By doing so, you'll position yourself to capitalize on growth, manage unpredictability and achieve sustainable, long-term success. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
India.com
13-07-2025
- Business
- India.com
How To Get Rich The Smart Way: Gen Z's Guide To Lessons From ‘The Psychology Of Money'
photoDetails english 2931180 The book focuses on the key insights on wealth-building through behavior, not just knowledge. From the importance of preserving wealth and avoiding lifestyle inflation to embracing patience, humility, and compounding, the story highlights lessons Gen Z can apply early in life. Instead of chasing quick riches, Housel encourages a long-term mindset grounded in self-awareness, discipline, and emotional control. Scroll down to read more. Updated:Jul 13, 2025, 03:03 PM IST About the Book 1 / 7 Written by Morgan Housel and published in 2020, The Psychology of Money is an amazing book that explores the thing which is often overlooked, the emotional and psychological side of personal finance. Rather than focusing on complex formulas or investment strategies and he talks about our mindset and it's importantance in handling our money. (This article is meant for informational purposes only and must not be considered a substitute for advice provided by qualified professionals.) Earning Wealth Is One Thing, Preserving It Is Another 2 / 7 Many people focus on how to make money, through hard work, ambition, or risk-taking. But the author argues that staying wealthy is a whole different thing. It requires qualities like humility, patience, and fear of loss. It's great to be bold while building wealth whether it's investing or starting businesses, but knowing when to stop and protect what you've earned is what will help you in the long run. Don't Let Your Spending Grow with Your Income 3 / 7 Saving money has little to do with income and everything to do with behavior. The more people earn, the more they tend to spend, often on things that don't bring lasting happiness, so the author says you don't have to increase your lifestyle every time your income increases. Money Means Different Things to Different People 4 / 7 One of the book's strongest messages is that there is no single "correct" way to use money. People behave the way they do because of their individual backgrounds, experiences, and beliefs. What feels smart to one person might feel risky or unnecessary to another. Everyone has their own situations and no one is crazy to react in a certain way. Luck and Risk 5 / 7 Housel says that financial outcomes are not always the result of skill or bad judgment, luck and risk play a huge role. Some people succeed because of good timing; others fail despite making good decisions. Recognizing this makes you more empathetic, humble, and careful. Let Time Turn Small Gains into Big Results 6 / 7 Housel calls compounding one of the most powerful financial forces, not just for investing, but in life. The trick is not chasing big wins, but allowing small gains to grow over long periods of time. Patience, not genius, builds wealth. Even small investments now can grow exponentially over decades. Conclusion 7 / 7 The book reminds us that building wealth isn't just about earning more, it's about thinking differently. By focusing on behavior, patience, and a long term mindset over quick wins or flashy spending, anyone can build lasting financial stability. In a world full of noise, Housel's advice is simple but powerful. He says that learn to master your emotions, respect time, and let your money habits reflect your values.
Business Insider
03-07-2025
- Business
- Business Insider
Most Americans aren't paying attention to a key part of retirement that has nothing to do with investing
Americans may be brushing over a key component of retirement planning: What they want their days to look like, how they want to spend their time, and what pastimes they want to incorporate in their golden years. A 2025 survey from Lincoln Financial found that 77% of Americans in their 50s and 60s view retirement as a "new chapter" to pursue passions they didn't have time for while working — yet, the majority haven't actually planned or budgeted for pastimes in retirement. While pre-retirees intend to do additional planning for pastimes once they hit retirement, only 38% report having done some or a lot of planning. The majority of pre-retirees have done little to no planning for how to spend time in retirement. To inspire pre-retirees to flip the script, Lincoln Financial partnered with wellness advocate and podcast host Rich Roll on a four-part video series, " The Action Plan." Roll spoke with tennis legend Andre Agassi, the "The Psychology of Money" author Morgan Housel, and others about how they're planning ahead to ensure they can pursue their pastimes into retirement. "My generation has a very different relationship with retirement than our parents did," Roll, 58, told Business Insider. "We're not in a job and looking toward that date on the calendar where we're going to hang it up and then go play golf. That's just not the typical experience, and it's not really the way the world works anymore." Plus, lifestyles and lifespans have changed. "We're also healthier and living longer and more vital in our older years than that generation, which begs the question: How can I continue to do these things that I enjoy doing? And these things cost money," said Roll. Perhaps more money than you'd expect. Lincoln Financial also surveyed retirees age 50 and above, and among that group, 39% underestimated the cost of their pastimes. To plan for the cost of your hobbies and pastimes, you have to spend time thinking about how you actually want to spend your time in retirement and what will make you feel fulfilled, whether that's picking up a sport or an instrument, volunteering, teaching, gardening, or hosting. Roll found inspiration in Agassi's outlook. "What lights him up is creating opportunities for other people," he said of the retired tennis player turned philanthropist. "I think that's a really important lesson, especially for anyone who is approaching the later stages of their career who wants to stay engaged, whether through personal activities or through business: Tie whatever that passion is to something that holds greater meaning than just yourself. And I think that's a recipe for maintaining your connection with your vitality and continuing to pursue a life that is meaningful and purpose-driven." Catching up on retirement planning and saving If you're approaching retirement and feeling behind on planning or saving, you have company. "Less than one in 10 retirees had a firm estimate on what their day-to-day costs were, so anybody who falls in that category, they're not alone," James Reid, executive vice president of Lincoln Financial, told BI. That said, "It starts today. Today starts the wave for the future." Roll, who started his career in corporate law and quit to train as an ultra-endurance athlete, considers himself a "late bloomer" when it comes to his career and finances, and recognizes that he still has "a lot of work to do." "In a perfect world, I would have just been stashing away small amounts of money every single month since I was 21 years old. That's just not what I did," he said, adding: "It's not too late. If you're someone like myself who hasn't been putting money away for the past 25 years, that is something that you can still overcome, but you have to face it." The author, podcast host, and public speaker has no intention of slowing down anytime soon. When asked if he thinks he'll ever retire, he was quick to say, "I don't." But he's laying the foundation now to have the option of scaling back from work if he ever wants to. "I don't think of retirement like, I'm just one day going to flick a switch and it's all over," he said. "I don't imagine that day ever coming, nor do I really aspire to that, but I also recognize that everything is impermanent. The promise to myself, at least with the podcast, is that I'll continue to do it as long as I find it invigorating and interesting and nourishing in all the ways that it currently is, but one day will come where I'll say, 'I think I've done enough of this.'"
