Psychology of Money: What we think about when we think about money
Most best-selling books on investing and personal finance are from the west (mostly US). With such publications, readers in India will need to do some sifting through and quite a bit of mental arithmetic before deriving value from the book.
Rarely does a book come along that is readily accessible and relevant to the Indian audience. “The Psychology of Money” by Morgan Housel is one such book. I heartily recommend it.
Morgan distils the enduring wisdom about the relationship between people and their money in 20 chapters. Some of these chapters are about stocks and the market, but most of them are about people – about the games they play with money.
Each of these chapters can, as the author notes, be read individually as well. But they are not disjoint essays. Each essay pushes the narrative farther, and helps the reader to get a fulsome understanding of how the relationship with money works for people – all the misconceptions about money and wealth and all the traps and pitfalls investors land themselves in time and again.
That said, this book is definitely not a litany of “don’ts”. For every single admonition that the author makes, he points to the right way as well.
The concepts themselves are simple and time-tested – the role of luck in investing, why timing the market will not work over long periods of time, importance of patience, the right way to do planning and more.
But Morgan writes about them with a straightforward clarity and with persuasive arguments, and always keeps it interesting. To illustrate the power of compounding, he goes all the way to the geology of ice ages. To show the power and importance of luck, he cites an example from the early life of Bill Gates. And he uses examples from his own youth to tell readers about how people perceive being rich.
The most important point that the author makes is about why one should strive to build wealth – why one should save and invest. If one reads the book and takes that single point to heart, it would have served its purpose.
I would recommend the book especially to young people – the sooner they understand these points, the better the rest of their lives would be.
The book is definitely worth the time and effort (It is neither long – 240 pages, nor expensive Rs 285). However, if you don’t want to spend the time/money to get the book, you can read a synopsis of the book here in Morgan Housel’s website.
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