Books Insights Money Non-Fiction

The Psychology of Money by Morgan Housel | Book Report


  • You want to find out how humility plays an important role in financial independence
  • You hope to have a healthy (-ier) relationship with money
  • You want some powerful insights if you’re looking to invest or already investing in the stock market

I discovered this book through a YouTuber. Interested ako sa money matters kasi ayaw namin na maging problema ang pera pag retired na kami. Gusto kong maging prepared sa mga pwedeng mangyari. When it comes to budgeting, lahat ng expenses namin up to the very last cent naka-track. Pero lumalagpas pa din kami sa budget. Dumating yung point na na-frustrate ako. Parang wala naman effect yung expense tracking ko. So mas lalo akong naging interested sa book na ‘to kasi parang kulang pa yung alam ko pagdating sa pag-manage ng pera.

Lahat naman tayo gusto na pag nag-retire tayo, sapat yung pera natin. Pero feeling ko kasi hindi pa ko sobrang knowledgeable para ma-achieve yung financial independence. Ang hirap nung gusto mo lang pero hindi mo naman inaalam kung pano. Kaya curious ako kung anong matuturo ng book na ‘to. And gusto ko rin yung title kasi hindi sya yung tipong, “How to be a Millionaire in 90 Days” (whut) or “How to be Filthy Rich”. Gusto ko yung The Psychology of Money.

To rephrase an old saying: everyone talks about retirement, but apparently very few do anything about it.

The author started with a story about two people. The first one is a janitor who’s also a gas station attendant and the second one is a highly educated person na naka-graduate sa Ivy League university at nagkaron ng successful na business. Contrasting yung background and lifestyle nung dalwa. In short, nung nag-pass away yung janitor, his net worth was over $8M. Si businessman, na-bankrupt.

Si janitor consistent syang nagse-save and nilalagay nya yung savings nya sa blue chip stocks. Dahil sa power of compounding, lumaki ng ganun yung pera nya. At wala syang ibang ginawa. Hindi sya nag-business or nag-trading or kung ano mang get-rich-quick schemes. Naging masinop lang talaga sya at naging consistent pagdating sa pera nya. Si businessman, umiral ang pagiging greedy kaya na-bankrupt.

The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.

Ang ganda na eto yung simula ng libro. Kasi maiisip mo na hindi naman lahat kelangan ng super successful business or magkaron ng malaking inheritance para makaipon ng ganun kalaki.

Luck and risk’s contribution to success

May sinabi yung author about luck and risk. Parang sinasabi dito na some people are super duper successful because of luck or dahil they took risks na naging sobrang advantageous yung result. On the contrary, some people didn’t reach the success they had in mind because of lack of luck. At kahit they also took risks, hindi naman nag-work out.

We similarly think Mark Zuckerberg is a genius for turning down Yahoo!’s 2006 $1 billion offer to buy his company. He saw the future and stuck to his guns. But people criticize Yahoo! with as much passion for turning down its own big buyout offer from Microsoft—those fools should have cashed out while they could! What is the lesson for entrepreneurs here? I have no idea, because risk and luck are so hard to pin down.

Pero ang common denominator dito ay these people are doing something and exerting effort. Hindi mo alam kung kelan dadating yung luck or kung dadating ba talaga. Ang importante ay gawin mo kung anong tingin mong dapat gawin kasi yun yung may control ka. Wala kang magagawa sa external forces. Walang kasiguraduhan ang luck at risk.

Years ago I asked economist Robert Shiller, who won the Nobel Prize in economics, “What do you want to know about investing that we can’t know?”

“The exact role of luck in successful outcomes,” he answered.

I love that response, because no one actually thinks luck doesn’t play a role in financial success. But since it’s hard to quantify luck and rude to suggest people’s success is owed to it, the default stance is often to implicitly ignore luck as a factor of success.

So I think ang lesson is wag maging too hard on ourselves. Sometimes talagang sobrang swerte lang yung iba. Pero hindi porke ganun, hindi na tayo kikilos. Sabi nga, success is 10% preparation and 90% luck. Haha di ko sure kung tama tinatamad na ko i-Google. Tsaka ang lagi kong sinasabi, hindi naman natin kelangan maging billionaire para maging masaya.

…as much as we recognize the role of luck in success, the role of risk means we should forgive ourselves and leave room for understanding when judging failures.

Nothing is as good or as bad as it seems.

Extreme comparison is dangerous

Minsan hindi natin mapigilan na i-compare ang success natin sa success ng mga billionaires. Nakakapanliit and minsan imbis na ma-encourage ka, lalo ka pang nadi-discourage. Pero eto yung sabi sa book:

Studying a specific person can be dangerous because we tend to study extreme examples—the billionaires, the CEOs, or the massive failures that dominate the news—and extreme examples are often the least applicable to other situations, given their complexity. The more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk.

Know when to stop

Eto yung natutunan ko sa mga articles at videos na nabasa ko noon. Na hindi porke lumalaki ang sahod natin, ia-adjust din natin yung lifestyle natin pataas. Medyo mahirap kasi syang pigilan. Yung kapag hindi mo afford yung isang bagay, madalas may internal monologue ka na, “Pag ako nagka-increase mag-a-upgrade ako sa ganito ganyan…” So pag naincrease-an ka na, ganun nga yung gagawin mo. Tapos ganun din yung mangyayari sa mga next na increase. Kaya tuloy parang ang hirap makaipon.

The hardest financial skill is getting the goalpost to stop moving. But it’s one of the most important. If expectations rise with results there is no logic in striving for more because you’ll feel the same after putting in extra effort. It gets dangerous when the taste of having more—more money, more power, more prestige—increases ambition faster than satisfaction.

True enough, malaki talaga ang influence ng ibang tao kaya parang ang hirap maging kuntento. Lagi kasing may mas mukang maganda. Yung okay naman yung ginagamit mong keyboard pero makikita mo sa iba, “Parang mas maganda yung mechanical keyboard.” At nabudol ako dito. Umorder ako ng mechanical keyboard hahaha. Pero. Pero. May wellness allowance si Kenneth na pwede ko rin gamitin kaya mare-reimburse yung keyboard. Tumutupad pa din ako sa usapan ko sa sarili ko na hindi ako bibili ng electronics/gadgets this year.

Siguro ang perfect example ay yung pagbili ko ng AirPods Pro last year. Pangit na pangit ako sa AirPods noon. Pero the more na tumatagal at mas na-eexpose ako sa kanya, parang nagandahan na rin ako. Although masasabi kong sulit naman kasi araw araw ko syang gamit at okay naman sya for me, pero for sure meron pa ding mas mura na okay.

Modern capitalism is a pro at two things: generating wealth and generating envy. Perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. But life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.

Ugh ganda non. Bago ko pa mabasa ‘tong book meron na talaga kong plano na maging mindful sa expenses namin. Pero ang ganda na nabasa ko pa din ‘tong book na ‘to kasi na-reinforce yung plano ko na magtipid.

…the only way to win is to not fight to begin with—to accept that you might have enough, even if it’s less than those around you.

Being average is not a bad thing. Instead of chasing a luxurious lifestyle, find contentment. And realize that we can be ultimately happy with being average. Luxury can cause lots of issues anyway. It can poison us. It’s high maintenance. It’s a hustle. Naniniwala talaga ko sa mo money mo problems.

Achieving big success is one thing, maintaining it requires a whole different skill

I will keep this in mind. Ngayon parang wala akong maisip na kelangan ng hardcore maintenance.

Getting money requires taking risks, being optimistic, and putting yourself out there.

But keeping money requires the opposite of taking risk. It requires humility, and fear that what you’ve made can be taken away from you just as fast. It requires frugality and an acceptance that at least some of what you’ve made is attributable to luck, so past success can’t be relied upon to repeat indefinitely.

Mind the buffer

I think one of the reasons why most middle class men don’t get to the point of reaching their millionaire dreams is because they are inclined to buy those fancy, premium items. Sila yung madalas nabibiktima ng mga budol sa social media. They rationalize that they need those things too and that they can afford it. While it can be true that they have the money to afford it, what they don’t realize is that those who they want to emulate, they have an income that are 5-10x more than theirs. Those people have enough buffer when something catastrophic happens. While the middle class reduce their buffer to zero. Mind the buffer.

A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality.

A good plan doesn’t pretend this weren’t true; it embraces it and emphasizes room for error. If there’s enough room for error in your savings rate that you can say, “It’d be great if the market returns 8% a year over the next 30 years, but if it only does 4% a year I’ll still be OK,” the more valuable your plan becomes.

Time as a currency

Dito ako very good. Pero minsan umaabuso. Sa sobrang vina-value ko yung oras ko, sinasagad ko yung SLs ko kahit wala naman akong sakit haha. And kaya din ako nag-resign kasi hindi ako masaya na rigid yung oras ng trabaho. Hindi ko nga alam kung papuntang tamad na ba yung sakin hahaha. Pero para sa mga workaholic:

In his book 30 Lessons for Living, gerontologist Karl Pillemer interviewed a thousand elderly Americans looking for the most important lessons they learned from decades of life experience. He wrote:

No one—not a single person out of a thousand—said that to be happy you should try to work as hard as you can to make money to buy the things you want.

No one—not a single person—said it’s important to be at least as wealthy as the people around you, and if you have more than they do it’s real success.

Tingin ko mas applicable ‘to kay Kenneth. Lagi ko syang sinasabihan na gamitin ang leaves nya. Na magfile ng sick day pag sobrang stressed na sya. Ang hirap din nyang i-convince na magtravel noon nung nasa Pinas pa kami. Pero once mapapayag ko sya, kita namang enjoy na enjoy sya. Ngayon naman ang hirap nyang i-convince na umuwi ng Pinas. Laging may dahilan.

People don’t care about your Gucci wallet

Haha meron kasi akong kaibigan na naisipang pumunta dito sa Canada para daw mas lumaki ang sahod nya. In short dahil gusto nyang bumili ng mga luxurious items tapos may nabanggit syang Gucci wallet kaya yun yung tumatak sakin. Nakakatawa lang na medyo nakakalungkot kasi kung sinesweldo namin sa Pinas yung sahod nya, hindi na kami pupuntang Canada. Sa Pinas na lang kami.

No one is impressed with your possessions as much as you are.

Gusto ko yung story na ‘to from the author. Dati kasi syang valet.

The best part of being a valet is getting to drive some of the coolest cars to ever touch pavement. Guests came in driving Ferraris, Lamborghinis, Rolls-Royces—the whole aristocratic fleet.

It was my dream to have one of these cars of my own, because (I thought) they sent such a strong signal to others that you made it. You’re smart. You’re rich. You have taste. You’re important. Look at me.

The irony is that I rarely if ever looked at them, the drivers.

When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Subconscious or not, this is how people think.

If respect and admiration are your goal, be careful how you seek it. Humility, kindness, and empathy will bring you more respect than horsepower ever will.

Hindi ko na masyadong inalam yung intentions and motivations ni Gucci wallet. Pero bakit nga kaya ganun? Kasi madalas sinasabi na, “Kaya ako bumili nito kasi regalo ko ‘to sa sarili ko. I want to reward myself. It makes me happy.” Pero kung talagang binili mo lang yan para i-satisfy ang sarili mo, sige nga wag mo nga i-post? Sige nga try mo nga pigilan na wag isipin yung perception ng ibang tao dun sa premium item na binili mo? Sige nga?? (Haha galit?)

You might think you want an expensive car, a fancy watch, and a huge house. But I’m telling you, you don’t. What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does—especially from the people you want to respect and admire you.

Looking rich versus being rich

I think some people choose to look rich instead of being truly rich. Eto nanaman para sa ibang tao nanaman. Sobrang dami na nating sina-sacrifice para lang sa iisipin ng ibang tao. This has got to stop.

We tend to judge wealth by what we see, because that’s the information we have in front of us. We can’t see people’s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success. Cars. Homes. Instagram photos.

But the truth is that wealth is what you don’t see.

Wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see.

Gusto ko ‘tong Rihanna example 😁:

Singer Rihanna nearly went bankrupt after overspending and sued her financial advisor. The advisor responded: “Was it really necessary to tell her that if you spend money on things, you will end up with the things and not the money?

Buti na lang hindi ako nagmana sa Mama. Mama ko kasi nangongolekta ng bag at sapatos. Ako walang kahilig hilig. As mentioned sa aking 2021 Game Plan, wala akong balak bumili ng damit this year. Kasama na dun ang sapatos at bag. Wish me luckz!

When most people say they want to be a millionaire, what they might actually mean is “I’d like to spend a million dollars.” And that is literally the opposite of being a millionaire.

Investor Bill Mann once wrote: “There is no faster way to feel rich than to spend lots of money on really nice things. But the way to be rich is to spend money you have, and to not spend money you don’t have. It’s really that simple.”

Sabi sa book may difference ang rich and wealth. Rich is on display while wealth is invisible.

It’s not hard to spot rich people. They often go out of their way to make themselves known.

But wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later.

Spending money to show people how much money you have is the fastest way to have less money.

Ego is the culprit

Punta tayo sa isa sa pinakagusto kong quote sa book na ‘to:

Past a certain level of income, what you need is just what sits below your ego.

As explained sa librong ‘to, lahat tayo may basic needs. Food, water, shelter, etc. After natin ma-meet ‘tong pinaka basic, merong comfortable basics. I think eto yung kama, electric fan or AC, oven or microwave, etc. Tapos after neto meron pang upgraded levels of comfort and entertainment. Medyo dito na nagva-vary yung mga choices ng tao. Dito na papasok yung mga local brands versus luxury brands. So parang anything you spend na lagpas na sa mga bagay na “pwede na” is a reflection of your ego.

All lifestyles exist on a spectrum, and what is decent to one person can feel like royalty or poverty to another. But at our incomes we got what we considered a decent apartment, a decent car, decent clothes, decent food. Comfortable, but nothing close to fancy.

Another favorite quote:

Think of it like this, and one of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility.


Savings can be created by spending less.

You can spend less if you desire less.

And you will desire less if you care less about what others think of you.

As I argue often in this book, money relies more on psychology than finance.

Savings provide flexibility

The most important part of every plan is planning on your plan not going according to plan.

Para dun sa mga nagiisip na, “Matagal pa naman akong magreretire” or “Mukang wala naman akong paggagamitan saka na ko magse-save”, Parang sinasabi lang dito na you don’t need a reason to save. Basta mag-save ka na lang kasi isang advantage na nabibigay ng savings ay flexibility.

In a world where intelligence is hyper-competitive and many previous technical skills have become automated, competitive advantages tilt toward nuanced and soft skills—like communication, empathy, and, perhaps most of all, flexibility.

If something happens in your life at gusto mong magswitch ng careers halimbawa or gusto mong magretire ng maaga, hindi mo sya magagawa kung wala kang savings. Actually pwede naman pero siguradong sasakit ang ulo mo kakaisip kung kakayanin ba. Kumbaga hindi ka lang nagse-save for future emergencies pero pwede ka rin mag-save for future major life changes.

Having more control over your time and options is becoming one of the most valuable currencies in the world.

Invest according to your risk tolerance

Sa ngayon medyo mataas yung tolerance namin for risk kasi bata pa kami. Kasi kung bumagsak man ang stock market, may room pa or may time pa kami para antayin na mag-bounce back. Siguro pag umeedad na kami i-shift namin yung investments namin sa 100% low index funds.

You can plan for every risk except the things that are too crazy to cross your mind. And those crazy things can do the most harm, because they happen more often than you think and you have no plan for how to deal with them.

Aim for the middle

Long-term planning is harder than it seems because people’s goals and desires change over time.

Eto yung way of thinking na bago sa pandinig ko. Sinasabi dito na when it comes to financial planning, may disadvantage pag iniisip agad natin yung long-term. Kasi nga hindi natin alam kung anong mangyayari. May mga magbabago. Magbabago din tayo. Kaya dun tayo sa safe. Tingin lang tayo sa gitna. Wag masyadong extreme yung calculations natin.

We should avoid the extreme ends of financial planning. Assuming you’ll be happy with a very low income, or choosing to work endless hours in pursuit of a high one, increases the odds that you’ll one day find yourself at a point of regret. The benefits of an extreme plan—the simplicity of having hardly anything, or the thrill of having almost everything—wear off.

Medyo applicable ata ‘to sakin kasi medyo nasa crazed phase ako na parang lahat ng kaya namin i-save kelangan ma-save namin. Baka meron akong mga aspects na nakakaligtaan sa sobrang focused ko sa pagiipon. Baka masyado na pala kong kuripot or nade-deprive na kami of some things na hindi ko mapin point. Ewan ko. This is something na kelangan kong i-contemplate.

Aiming, at every point in your working life, to have moderate annual savings, moderate free time, no more than a moderate commute, and at least moderate time with your family, increases the odds of being able to stick with a plan and avoid regret than if any one of those things fall to the extreme sides of the spectrum.

The fee for greater returns

If you’re investing in the stock market, meron talagang uncertainties sa pagtaas at pagbaba ng value ng stocks. Pero kung plano mo mag-invest sa mga blue chip stocks, most probably kung bumaba man yan, pataas pa din yung overall trend. So para makinabang ka sa stock market, wag kang mag-panic sa mga dips. Yun yung hindi naiintindihan ng mga kaibigan namin. Kasi pag sinasabihan namin sila na mag-invest na sa stocks, hindi sila ganun ka-receptive. Duda sila agad kung talaga bang kumikita sa stocks.

The question is: Why do so many people who are willing to pay the price of cars, houses, food, and vacations try so hard to avoid paying the price of good investment returns?

The answer is simple: The price of investing success is not immediately obvious. It’s not a price tag you can see…

But if you view volatility as a fee, things look different.

Lagi nilang tanong, “Magkano na ang kinita nyo?” Which I think is not the question to be asked kasi less than a year pa lang kami nag-iinvest dito. So malamang hindi pa ganun kalaki. Pero kung susubukan lang sana nilang intindihin yung advantage ng pagiinvest ng long-term dahil sa power of compounding, hindi siguro sila magdadalwang isip.

The volatility/uncertainty fee—the price of returns—is the cost of admission to get returns greater than low-fee parks like cash and bonds.

The trick is convincing yourself that the market’s fee is worth it. That’s the only way to properly deal with volatility and uncertainty—not just putting up with it, but realizing that it’s an admission fee worth paying.

Tapos lagi nilang sinasabi na, “Saka na pag may extrang pera na.” which really means, “Pakyu hindi ako magiinvest sa stock market. Stock market sus!” Hahaha. Sinabi na rin namin na hindi naman kelangan ng malaking pera para magsimula. Ewan sila na bahala. Basta ako sinabihan ko na sila. Hindi nila nare-realize na ang the best time magstart ay ngayon. As in now na.

So yun. Yun lahat yung mga natutunan ko sa book na ‘to. Sobrang love ko yung summary sa huli. So in short:

  • Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong.
  • Respect the power of luck and risk and you’ll have a better chance of focusing on things you can actually control.
  • Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future.
  • If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. Time is the most powerful force in investing.
  • Use money to gain control over your time, because not having control of your time is such a powerful and universal drag on happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.
  • Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome.
  • Save. Just save. You don’t need a specific reason to save. It’s great to save for a car, or a downpayment, or a medical emergency. But saving for things that are impossible to predict or define is one of the best reasons to save.
  • Remember that most financial costs don’t have visible price tags. Uncertainty, doubt, and regret are common costs in the finance world. They’re often worth paying. But you have to view them as fees (a price worth paying to get something nice in exchange) rather than fines (a penalty you should avoid).
  • Avoid the extreme ends of financial decisions. Everyone’s goals and desires will change over time, and the more extreme your past decisions were the more you may regret them as you evolve.

RATING [4.5 🌟]

Sobrang gandaaa ng book na ‘to. Hindi ko na kelangan i-explain kung bakit kasi na-extract ko na lahat. Kahit it’s a book about money, yung main take away ko dito ay ang importance of humility at being flexible sa mga pwedeng mangyari sa future.

Gusto ko rin yung layout ng book and I appreciate na hindi ganun kahaba yung mga chapters. Although may mga chapters na hindi ko favorite, sobrang bawing bawi naman lalo na dun sa mga naunang chapters. Isa pang na-appreciate ko yung summarization sa huli.


More about luck and risk:

Studying history makes you feel like you understand something. But until you’ve lived through it and personally felt its consequences, you may not understand it enough to change your behavior.

Luck and risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort.

For every Bill Gates there is a Kent Evans who was just as skilled and driven but ended up on the other side of life roulette.

If you give luck and risk their proper respect, you realize that when judging people’s financial success—both your own and others’—it’s never as good or as bad as it seems.

When judging others, attributing success to luck makes you look jealous and mean, even if we know it exists. And when judging yourself, attributing success to luck can be too demoralizing to accept.

…realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.

A friend of mine makes an annual pilgrimage to Las Vegas. One year he asked a dealer: What games do you play, and what casinos do you play in? The dealer, stone-cold serious, replied: “The only way to win in a Las Vegas casino is to exit as soon as you enter.”

On my first day I realized why investment bankers make a lot of money: They work longer and more controlled hours than I knew humans could handle. The job was intellectually stimulating, paid well, and made me feel important. But every waking second of my time became a slave to my boss’s demands, which was enough to turn it into one of the most miserable experiences of my life. It was a four-month internship. I lasted a month.

The hardest thing about this was that I loved the work. And I wanted to work hard. But doing something you love on a schedule you can’t control can feel the same as doing something you hate.

History is the study of change, ironically used as a map of the future.

The correct lesson to learn from surprises is that the world is surprising. Not that we should use past surprises as a guide to future boundaries; that we should use past surprises as an admission that we have no idea what might happen next.

“When I asked Danny how he could start again as if we had never written an earlier draft,” Zweig continued, “he said the words I’ve never forgotten: ‘I have no sunk costs.’”

Sunk costs—anchoring decisions to past efforts that can’t be refunded—are a devil in a world where people change over time. They make our future selves prisoners to our past, different, selves. It’s the equivalent of a stranger making major life decisions for you.

Some quotes about pessimism:

Every group of people I ask thinks the world is more frightening, more violent, and more hopeless—in short, more dramatic—than it really is,” Hans Rosling wrote in his book Factfulness.

When you realize how much progress humans can make during a lifetime in everything from economic growth to medical breakthroughs to stock market gains to social equality, you would think optimism would gain more attention than pessimism. And yet.

Progress happens too slowly to notice, but setbacks happen too quickly to ignore.

There are lots of overnight tragedies. There are rarely overnight miracles.

“Are you (Stephen Hawking) always this cheerful?” the Times asked.

“My expectations were reduced to zero when I was 21. Everything since then has been a bonus,” he replied.

Maybe that’s why it’s so seductive. Expecting things to be bad is the best way to be pleasantly surprised when they’re not.

Which, ironically, is something to be optimistic about.

Why the author invests only in low-cost index fund:

We can leave aside rich, but independence has always been my personal financial goal. Chasing the highest returns or leveraging my assets to live the most luxurious life has little interest to me. Both look like games people do to impress their friends, and both have hidden risks. I mostly just want to wake up every day knowing my family and I can do whatever we want to do on our own terms. Every financial decision we make revolves around that goal.

Over the years I came around to the view that we’ll have a high chance of meeting all of our family’s financial goals if we consistently invest money into a low-cost index fund for decades on end, leaving the money alone to compound. A lot of this view comes from our lifestyle of frugal spending. If you can meet all your goals without having to take the added risk that comes from trying to outperform the market, then what’s the point of even trying? I can afford to not be the greatest investor in the world, but I can’t afford to be a bad one. When I think of it that way, the choice to buy the index and hold on is a no-brainer for us. I know not everyone will agree with that logic, especially my friends whose job it is to beat the market. I respect what they do. But this is what works for us.

My investing strategy doesn’t rely on picking the right sector, or timing the next recession. It relies on a high savings rate, patience, and optimism that the global economy will create value over the next several decades. I spend virtually all of my investing effort thinking about those three things—especially the first two, which I can control.

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