This blog is from A to Z inspired by one of my recent book reads, Same As Ever by Morgan Housel. After his insightful The Psychology of Money, this book shows phenomena and behaviors that stand the test of time over years and decades. As Morgan says, these are some of the signals that drive you and the world over the long term. Many of these signals, facts, and psychology, can be aptly mapped to the world of money and investing. Some of these are outlined in the book directly, and few others, I have attempted to draw a correlation.
Time Horizon
It is easy to tell oneself to focus on long-term investing, but the fact is, they are made up of short term goals. More challenging, you have to put up with all the short-term vagaries. You need to deal with not just your convictions, but the support system of others (who may start losing faith in your decisions), and the changing world even challenges your own beliefs. And remember, there is nothing called an End Date in the long term.
In the long term, everyone is dead!
So, instead of setting up a final date when you realize all your goals, a more pragmatic way to deal with investing is through a journey with goal pitstops.
Trying Too Hard
Complexity is revered in this world, and simplicity is looked at with suspicion. But the fact is, the outcome does not give additional points to complexity. Investing principles are as simple as – Patience and Diversification. But those are not intellectually stimulating. And it makes us doubt ourselves, do we know enough? Are we missing out on key information?
The grass is always greener on the side fertilised with bullshit!
The world is tempted to listen to influencers and get dazzled. Only then, do we feel we know enough!
Casualties of Perfection
An investing quip goes – It is better to be approximately right than precisely wrong. A long-term mindset is great, but predicting the exact path is a waste of resources. It also loosely reminds me of the dot extrapolations data scientists do to track trajectory. Think of the dots as decisions and results, and the line as your overall investing outcome trajectory. It would be wasteful to predict each of the positions of the dots, as long as the trajectory is in an acceptable direction.
Now You Get It
Your own first-hand experiences are the best persuaders. Even for advice from the best of investors like Warren Buffett – I will be greedy when others are fearful, is easier said than done. Your views and goals change when things break. All that comes in handy to remain persistent and sane are your own past experiences that you have collected through the investing journey.
Calm Plants the Seed of Crazy
- When economy is stable, people get optimistic.
- Optimistism leads to debt.
- Debt leads unstable economy.
The instability then leads government and institutions to take action to bring it on track, which is marked with pessimism on the road to recovery. And once the stability kicks in, the cycle repeats. Treat this as a recurring phenomenon and no going away from this. It will only help in making decisions during tough times.
Let these sync in. And cheers to the year ahead!
