Customer Review

Reviewed in India on 17 October 2020
I have read many books on personal finance, investments, money etc. but I have not come across a book as interesting as “The Psychology of Money” by Morgan Housel. There are 20 chapters in the book and each one of them have their own valuable message. The book is interesting in many ways. First of all, it communicates many complex concepts in very simple terms. For instance, a concept like “Bubble” which is often discussed in the world of finance is described by Housel as “The formation of bubble isn’t so much about people irrationally participating in long term investing. They are about people somewhat rationally moving towards short-term trading to capture momentum that has been feeding on itself”. This is just one example. The book is full of pearls of wisdom. There is nothing that can match a statement like “The only way to win in a Las Vegas casino is to exit as soon as you enter”.

Let me come to some of the most amazing insights that the book provides. The book talks about difference between getting wealthy and staying wealthy. The author says that many people acquire wealth but fail to preserve wealth and hence it is important to learn how to preserve wealth. As per Housel,” Preserving wealth requires humility, and the fear that what you have made can be taken away from you just as fast. It requires frugality and an acceptance that at least some of what you have made is attributable to luck, so past success cannot be relied upon to repeat indefinitely.” The author talks in detail about role of luck in investing at many places in the book. He quotes his conversation with Robert Schiller, winner of Nobel Prize in Economics, to whom he once asked, “What do you want to know about investing that we can’t know?”. In response to this question Schiller said, “The exact role of luck in successful investing”.

The author keeps on surprising with his wonderful understanding of money in different chapters of the book. But the exclusive chapter on saving, which is chapter 10, has many interesting aspects about savings. Emphasizing significance of savings, the author says “The first idea- simple, but easy to overlook-is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate.” He adds that you don’t need a specific reason to save. He has also mentioned something which is an eye opener. Past a certain level of income, what you need is just what sits below your ego. The author also highlights the need for knowing what is enough, when it comes to money.

In brief, you must read this book irrespective of how much you understand about money. There is something for everybody in this book.
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