Morgan Housel on Investing

This is the first interview I have captured about Morgan. I will keep updating as more and more knowledge and wisdom pours in.

Other Articles you may like:

https://medium.com/@msjaiswal/merciless-investing-by-saurabh-mukherjea-from-marcellus-ea7cbb65eb91

==== Presentation by Morgan ====

Q. Why did the Financial Crisis take place?

A. It’s less about Finance and more about behavioral Psychology. Learn about greed, fear, risk, uncertainty, financial goals.

Timing is meaningless and Time is everything.

Compounding is a wonder. Learn about it. Warren Buffet earned most of the money after is 50th birthday.

Compounding is not intuitive.

Bad thing to ask: What comes next.

Good thing to ask yourself: How long I am prepared to remain invested for.

Risk about an asset depends on how prepared YOU are.

Real Risks to your investments: Financial 2008 crisis, COVID, and other random events that you can’t predict.

==== Q & A ====

Q. Desires change and Goals change with time.

A. Best we can do is make odds in our favor for the future.

People know how much they have changed in the past but they underestimate how much they will change in the future.

YOLO = Spending like You Only Live Once leads to regret.

Q. Intergeneration Money Transfer.

A. Pass on the wealth early on in smaller amounts to young people so that they can learn how to manage.

Experiences you learn in Day Trading and exceeding budget should happen early in life.

Q. Your experiences define how you behave.

A. If you were born during a recession where the stock market gave 0 percent returns, you’ll hate Stock Market. People born in 1970s love it. Personal FInance is more personal than finance.

Q. How does one prepare for Risk?

A. World breaks down every 10 years in a very meaningful way. So, decrease your baseline expectations. Think long term and dont chase short term results.

Save a lot of money. Save a lot of money because the world is very uncertain and giving yourself room for error and giving you freedom in the future.

Q. Time in Market is important. But, couple of higher percentage returns makes a huge difference in 50 years. How to reconcile ?

A. Adjust your expectations. Focus on your goals and reaching them. If your strategy suffice for your goals, you’ll be happy.

Your desires should grow slower than your investments. Don’t move your goalpost too much. Keep it as low as possible.

Q. Risk of Inflation.

A. Inflation happens when: Too much money chasing a few investments.

The first thing to learn about compounding is to never interrupt it unnecessarily.

Q. Pessimism is much more seductive than Optimism. Why ?

A. When someone tells you pessimistic things, it feels like someone is trying to help you. Optimistic things sound like you are selling.

Save like a pessimist and invest like an Optimist.

Change your baseline to this: There will be market crashes, there will be recessions, frauds and there will be companies going bankrupt. Make a shift in your psychology to this.

Q. Valuation: How do you allocate your money? When do you rebalance?

A. I dollar cost average in index funds. I keep 20% Cash. It’s that simple. I will reach my financial goals this way, so I don’t have any desire to try new things.

Q. How do you feel about Investing in Emerging Markets.

A. Economic growth comes from population growth and Productivity Growth.

China’s working population is decreasing rapidly. India and Africa are the only two demographics with a growing working class.

Q. How does Dollar Cost Averaging works in Japan?

A. They had frontloaded 50 years’ return in the first 20 years. Japan’s economy on the other hand has done really well.

Q. Any trends that you find interesting?

A. Different people have experienced COVID differently. Either it was devastating for them or a complete nuisance.

More people will expect a better safety net from the government.

Q. Value investors did not make too much money.

A. Either Growth does well or Value does well. Back and forth keeps happening between them. When interest rates are high value, investing is popular and when interest rates are low, growth is more popular.

Q. What books do you like?

A. I like reading about World war because that time saw the maximum drama, uncertainty, and business problems.

Books: The Great Depression: A diary, Guns, and Last Night.

Q. Top biases to overcome to become a Better Investor?

A. Rather than overcoming the biases, just accept the biases. Figure out your own biases, personal quirks, and embrace them. Personal Finance is more personal than Finance.