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The upshots of Psychology of Money

ICICI Securities 29 Jul 2022

The book – ‘Psychology of Money,', nudges you to reconsider personal finance, investing, and company's success through the prism of psychology and behavior. All of these branches of study, in general, have their origins in Maths, data, and calculations. However, the book particularly emphasizes on how everything from your personal background and experiences entails you to achieve Financial Independence.

It also shows you how to develop a better relationship with money and take good financial decisions. According to the author, humans are not just ROI-optimizing machines, instead, he shows you how your psychology can work in the favour of attaining your financial goals.

Fundamental Takeaways

Goals should be a moving target:

It is extremely clear to have a goalpost that moves. Once you've accomplished your goals, you'll move on to the next one. And the cycle continues indefinitely. This is frequently fueled by comparing yourself to others, and you're usually comparing yourself to someone at a higher position on the career ladder than you.

Getting Money vs Keeping Money:

Getting Money and Keeping money are two completely different talents. While making money entails taking risks, working hard, and maintaining a positive attitude, keeping money is a different art. It facilitates risk mitigation, avoiding greed, and remembering that things can be taken away from you at any time.

Cash is not your enemy:

If you're young and make more money than you spend, the best way to optimize your long-term investment gains is to invest the maximum amount of your money in a diversified portfolio typically consisting of low-cost index funds. Therefore, cash is not your enemy. It’s simply how you deal with it.

Long Tails:

The majority of the time, the investing decisions that you take don't matter. It's the judgments you make on a few days when something huge happens - a massive downturn, a volatile market, a speculative bubble, etc. which makes the actual difference.

Investment Results:

According to the book, one should evaluate how well he/she has done by focusing on their individual investments with respect to their entire portfolio. It further adds that good decision is not always rational and that sometimes it is necessary to remember that you are an emotional being with distinctive demands.

Ideally, the book comprises of 19 short stories demarcating some examples of how beautifully finances can be managed along with some experiences and factual tales. Though, we will not be able to cover every chapter’s summary, don’t you worry! We are coming up with an invigorating series of chapters and its correlation with the products for your weekend reads.

Already excited? Keep watching this space to know more!

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

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