1

PSYCHOLOGY OF MONEY

• Talks about timeless lesson on wealth

greed, and happiness.
• Issued on 8 September 2020.
• Containing 20 chapters summarise in 24
slides.

Prepared By :- FARHAN KAGZI

Finnacle investment Academy

 2 ABOUT AUTHOR

1) Morgan Housel is a partner the collaborative fund.

2) He's the New York Times Best selling author of the psychology of
money and Same As Ever. His books have sold over six million copies and
have been translated into more than 50 languages.
3) he is a two-time winner of the Best in Business Award from the Society of
American Business Editors and Writers, and winner of the New York Times
Sidney Award. MarketWatch named him one of the 50 most influential
people in markets. He serves on the board of directors at Markel.
4) The psychology of money was a best selling book in India amazon the data
was published by him in January 2023.

“Nvidia CEO Jensen Huang once asked”

 3
INTRODUCTION OF GREATEST SHOW ON EARTH

1) The book teaches was doing well with money has a little to don't with how smart you are and a lot to do so
with how you behave .Behaviour is hard to teach even to really smart people.
2) Let share a some good news success with money isn’t knowledge , IQ, or mathematical prowess it’s all about
behaviour .
3) The author writes that you can harness the power of your own mind , your thought and your will – and you can
literally change your life. The financial success was more on soft skill ( how one mange's their psychological and
emotional impulses).
4) The chapter was basically talks about that ones not need MBA in finance or financial engineer it was not stop to
being wealthy in the future. We just need to be patient and have a better relationship with money. To known
that why people was crazily acquire debt it not need study of interest rates, the investor was selling in the bear
market was not including the study of maths and future return the ones think psychologically that their family
investment was been domineering their future.
5) The topics in this chapter was health care and money the first one was like modern science were new
discoveries was replaced old ones but second was a money which not like a physics with rules or laws.
“ A genius is the man who can do the average thing where everyone else around him losing his mind “
 4
NO ONE’S CRAZY

1) This chapter was basically talks how the different people of world belonging to different times think about how
money works in world all have different opinion and all do crazy stuff with money but no one was crazy
2) One of the reason behind it was every passing times the modern investment tools and financial tools was
introduced for EG 1978 retirement planning introduced in USA, 1998 Roth individual retirement planning (IRA),
the most popular today which was double in recent five years was index fund in 1970 , crazy people doing F&O in
2000 and crypto currency in 2009
3) Second reason was people thought and view about money is dissimilarly because People who have faced the
economic crisis have different biases & thoughts about risk & rewards than those who have seen stable prices
their entire life the Australian who sees a recession in 30 years has experienced something no American ever
has. Brokers who saw 1990’s great depression can experience something glory than upcoming generation can’t
even Imagin
4) How money works was very wildly from person to person what seems crazy to person might make sense to me.
That’s not because one of us was smarter than other or has better information but because of we had a different
life shaped and different and equally persuasive experience we all make decision based on our unique
experience to make sense to us at given moment
5) In short, we do the crazy stuff with money, but we are not crazy.

Your personal experiences with money makeup maybe 0.000001% of what’s happened in the world but maybe
80% of how you think the world works.
 LUCK & RISK
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N O T H I N G WA S A G O O D O R A S B A D A S I T S E E M S

1) Not all success is due to hard work and not all poverty is due to laziness . No financial outcome, either a success or failure
was due to hard work and sound decision . We are playing a game with countless people causes a accidental impact of
action outside of our control can be more consequential than the ones we consciously takes
2) Bill Gates was 13 years old in 1968 when he met classmate Paul Allen in this story the luck was there that only 303
million people in world as high school aged and one in million was attended Lakeside school that has a combination of
cash and foresight to buy a computer. Of course, Bill Gates’s success was due to his dedication & hard work. But, luck
played an important role. Even Bill Gates admitted by saying, “If there had been no Lakeside, there would have been no
Microsoft”. But now opposite the person names Kant Evans if he alive then it also a founding partner but it was died
before her graduation the chance of that was one in million it was a luck and risk.
3) The author was suggested that it was focus less on the specific individuals and more on the broad patterns of success
and failure. The more common the pattern more applicable it might be to your life. The Great people was known as
“God of Investment” Warren Buffet investment success was so Hard and extreme and performance of luck was very
likely high .
4) Finally, recognizing the role of luck in success and the role of risk in failure helps us develop greater humility when things
are going right and compassion when they are going wrong. When things are going well, know that you’re not invincible.
When things are going bad, know that you’re not a disaster. we should forgive ourselves and leave room for
understanding when judging failures .
“ one luck break , or one supremely shrewd decision – can we tell them a apart”
 6
NOT ENOUGH

1) People who are millionaire wants to be a billionaire. And people who are billionaires want to be in the top 3 of
the richest person on earth. Running behind more & more money is a never-ending game. The lesson from
these failures is that we shouldn’t risk what we have and need for what we don’t have and don’t need
2) The hardest financial skill is getting the goalpost to stop moving, best example of this author written in his
book was Rajat Gupta and Bernie Madoff who was ruin of what he have because of greedy and didn’t known
where was to stop” It gets dangerous when the taste of having more – more money, more power, more
prestige- increase in ambition faster than satisfaction.”
3) Social comparison is the problem here comparing your wealth with other people is a never-ending game. It’s
the battle that can never be won or that the only way to win is not to fight to begin with- to accept that it
might have enough, even if it’s less than those around you.
4) Enough is not too little:- enough means that we known when to avoid doing something we will regret. Many
things are not worth the risk regardless of gains - reputation, freedom, family and friends, love, and happiness.
5) “To make money they didn’t have and didn’t need, they risked what they did have and did need. And that’s
just foolish. It is just plain foolish. If you risk something that’s important to you for something that is
unimportant to you, it just does not make any sense”
 7
CONFOUNDING AND COMPOUNDING

1) This chapter highlight the power of the compounding and it’s profound impact on wealth accumulation. Author Housel
explain how small consistent action, can lead to be the extraordinary financial result. He emphasize the importance of
patience and long term thinking and financial planning .
2) Understand the compounding the concept was small but consistent investment into a significant wealth over a time
patience and long term approach are been crucial role in this process. In this book mention that the Warren Buffet
the legendary investor was made most of their wealth after the the age of 40 years as he starting the investing the
investing at the age of 11 years.
3) Author housel mention that to start investing at the early stage investing as starting allow the more time to
compounding to work it’s magic and highlight the importance of the financial literacy and investing from the young
age .
4) The mention thing in book was everyone earns the decent amount of return in the bull run but the people who made
the returns which was consistently good enough or sometimes beaten the market, and in worst time the one’s who’s
destroy less than the market that fund are extremely good acc to my point. The consistency is a quality to judge the
people .
5) The author housel said that don't take the big risk in hope for the highest possible returns . Go for decent returns that
can be sustained over a long time the counterintuitive nature of compounding leads even the smartest people to look
enormous power
“ $ 84.5 billion net worth of Warren buffet came after his 65th birthday. Our minds are not built to handle such
absurdities”.
 8
GETTING WEALTHY AND STAYING WEALTHY

1) In this chapter the author has differentiate between the skills needed to acquire wealth and those required to
maintain it . He argues that while getting wealthy involves taking risks and seizing opportunity , staying wealthy
requires humility , frugality and the ability to manage fear and uncertainty.
2) As per the our the first chapter the greatest show on the earth has author embedded the example and it
clearly discuses the how many people who became wealthy lost it all because they failed to transition from
wealth acquisition to wealth preservation.
3) The author also describe that while taking the risk which help you to make the wealthy , managing and
mitigating those risk was crucial for staying the wealthy. Maintain margin of safety in your financial planning.

➢ 1.3 million people was been died in this time period while
fighting nine wars.
➢ 33 recession was lasted a cumulative 48 years. The number of
forecaster predicted this was been zero.
➢ The stock market was fell more than 10% from a recent high at
least 102 times . Stock lost a third of their value at least 12
times.
➢ Our standard of living has been 20 fold in Therse 170 years.
 9
TAILS , YOU WIN

1) This chapter basically talks about the concept of the tail events rare and extreme outcomes that have a
disproportionate impact on the financial health and result . Author has explained how the small number of
the significant events often account on the majority of returns in investing and business . He emphasize the
importance of being prepared for theses events and not being discouraged by frequent smaller losses.
2) The author describe the investing genius as an individual who can do the average thing when all those around
them are going crazy. The investment decision you make on the 99% of the days don’t matter. It’s the decision
you make on the small number of days when something big was happening a massive downturns, a frothy
market, a speculative bubble, etc.
3) Like for e.g. Warren buffet has owned 400 to 500 stocks during his life. he’s made the majority of the money
on 10 of them. A lot of things in the business and investing work this way. Long tails – the farthest ends of a
distribution of outcomes – have tremendous influence in finance.
4) As the author mentioned and we all know that put a large amount of the investment into a single stock was
fullish so diversification benefit was also made and increasing the chances of capturing the alpha returns .
5) Thus the venture capitalist are the best for this about how he allocate the funds among the different startups
as he known that 1 out 100 was going to be the Unicorn and tailing the entire investment for more than double
has he invested .
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FREEDOM

1) In this chapter author stated that the value of financial independence and the freedom it brings. The author argues
that one of the greatest benefit of wealth is the ability to control you time and make choices that align with your
values. This chapter discusses how financial freedom can lead to be a more fulfilling and satisfying life.
2) The highest form of wealth is the ability to wake up every morning and said “ I can do whatever I want, when I want
with who I want for as long as I want”.
3) Author has given importance that financial freedom can lead to greatest autonomy and the ability to pursue
personal passion and interest.
4) The financial independence can reduce stress and anxiety by providing a safety net and eliminating the need to
worry about financial stability.
AS we have study about the equity and debt market we deep indulge the
knowledge of how the company can maintain it’s the cost of capital.

The balancing of amount of debt and equity has are require the careful
planning and discipline over the long term.

Thus the author has advices the clear vision goals and working consistently
towards them.
 11
MAN IN CAR PARADOX

1) In this chapter the author has explores the paradox where people often buy expensive items like cars , to
impress others but in realty those rarely notice or care . He argues that spending money to project a certain
image is largely ineffective and can lead to financial strain.
2) It was clearly differentiae in between the staying wealthy and getting wealthy in this a reasonable approach
should be adopted that “ do not risk what you want for what you have and what you want” the difference
between the aspiration and greediness.
3) The perfect example was reliance capital and reliance industries. Biggest mistake the reliance capital make was
that not say enough at the right point and it leads the aspiration into greedy . The enough was in the terms of
riskiness. It does not mean the author trying to say that stop earning but maintain their earning .
4) It can make wealthy and also take into account the margin of safety by innovating any project and maintaining
proper allocation of debt and equity.
5) Understanding true value of the money in terms of the security and the freedom and generate the ability of
make a meaningful choices , rather than a tool of impressing the others. Recognizing this can help the
individual for the making the rationale decision.
 12
WEALTH IS WHAT YOU DON’T SEE

1) This chapter was been highlighting the difference between being wealthy and looking wealthy . The author
explain that true wealth is the assets you don’t see – saving , investments and financial security – rather than
the visible sign of wealth such a luxury cars , big houses or designers clothes.
2) Building the true wealth requires the financial discipline , including saving consistently , living below your
means and investing wisely the author shares the strategies for maintaining financial discipline and avoiding
the temptation to spend excessively on visible luxuries.
3) Adopting the long term perspective on the wealth can help you focus on the financial security and stability
rather than short term satisfaction. The author has encourage readers to think about the their long term
financial make decision that contribute to lasting wealth.
4) The author discusses the pitfalls of trying to look wealthy and the financial instability it can cause In making the
other that we are the wealthy people.
5) those who decide not to buy something now to buy something later will stay wealthy for longer. Wealth’s
value lies in offering you option , flexibility, and growth to one day purchase more stuff than you could right
now . Not knowing the difference is a source of money of countless poor money decision.
 13
SAVE MONEY

1) In this chapter the author emphasize about the saving and the flexibility it provides, saving was not just about
achieving the financial goals but also about the achieving the convenience and also resilience in the different time
arising .
2) One can build the wealth without the high income, but has no chance of building wealth without a high saving rate.
Saving can be the created by spending less. And you will desire less if you care less about the others think of you
3) Savings without a spending goals gives you option and flexibility, the ability to wait and the opportunity to pounce. It
gives you the time to think . Let’s you change course on your own terms.
4) But there was a point when people has made their saving in only one varieties of the product and investment goes
hand on hand the people from different times has change their saving and investment habits also when in one regime
the people has seen attractive returns in the Fixed deposit and in some regime stock market.
5) The thin difference between the saving and investment was some people has pump their entire life time savings in the
different assets classes where all are not completely safe . The author has emphasize that thing if you have saving of
the Rs 1,00,000 lakh then put aside at least some 90% of saving in safe security and then remaining one it invest
where tails drive the returns.

“The only factor you you can control generate one of the only things
that matters
 14
REASONABLE > RATIONALE

1) In this chapter housel argues that financial decision should be based on the reasonable rather than purely
rationale understand difference between reasonable and rationale.
2) a rationale investor makes the decision based on numeric facts . A reasonable investor make these decision in
a conference room surrounded by co – workers who want to think highly of you be stick to your plan and
don’t let short term volatility force a bad decision.
3) Positive returns over a one period are odds of 68% likely , 88% likely over a 10 years and 100% likely over 20
years this no one in the market was wait for such a long period and did not earn decent amount money.
4) the author emphasize that a limitation of purely rationale decision making and the importance of considering
the psychological aspect of money management .it need to be tailor of financial strategies to individual values
and lifestyle rather than following generic advice
5) The optimal portfolio is was allowing to get peaceful sleep at night and then it generate the reasonable
amount of the returns which also maximizing your quality of the life control over your life. It made in such a
manner that it was stand against the recession and the blips in the road .
” Aiming the mostly reasonable works better
than trying to be coldly rational”
 15
SURPRISE

1) In this chapter discusses the role of uncertainty and unexpected events in financial planning . He argues that is
inherently unpredictable and that surprise are inevitable . This chapter highlight the importance of building
flexibility and resilience into financial plans to accommodate unforeseen circumstances.
2) The future is unpredictable and surprise are inevitable . Accepting this can help you prepare for a range of
possible outcomes and reduce the impact of unexpected events.in this the limitation of the forecasting and the
importance of being adaptable in the face of uncertainty are been describe in the books.
3) The further back in the history you look , the more general your takeaways should be . General things like
relationship of the human beings , how they behave under the stress and how they respond to be stable in time.
The history was use in that kind of the stuff.
4) But the specific trend, trades and specific sector likewise what people should do with their money are always a
part of the evolution in the progress.
5) Thus the author advise readers to adopt conservative financial strategies that can withstand surprise and reduce
the vulnerability to shocks in this the overconfidence in predicting the future can lead to poor financial decision.
It important to remain humble and caution in your planning.

“history is the study of the change , ironically used as a map of the

future”.
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ROOM FOR ERROR

1) This chapter basically talks about importance of incorporating the margin of the safety into the decision . The
author explain that having that a buffer zone that can protect against unexpected setbacks and provide
flexibility in uncertain situation. The concept of the was been explain in the above mention slides.
2) In this chapter the author was differentiate the conservative concept and the margin of safety. The
Conservative means was to avoid the risk . Margin of safety means the handling and predicting before the
adverse situation arise.
3) What’s often overlook in the finance was that something can be technically true but contextually nonsense.
The people has the habits to make the unbelievable relationship of every possible predicting things but in
practical life was has relationship.
4) The biggest single point of failure with money is a sole reliance on a pay checks to fund the short term
spending needs, with no saving to create a gap between what you think your expenses are and what they
might be in the future. Use the room for errors when estimating the future returns.
5) One needs to realize that doesn't need to be the specific reason to save . It’s fine to save foe a car and home
loan or for a sake of retirement . But it’s equally important to save for things you can’t what you ‘ll use your
savings for assumes you live in a world where you know exactly what your future expense will be, which no
one does. Save as much as you can because you have no idea when you’ll use the savings for in the future.
 17
YOU’LL CHANGE

1) In this chapter author tells us the inevitability of change in personal circumstances and priorities over time. He explain
that people’s goals, values , and needs evolve, and the financial plans should be adaptable to these changes.
2) When thinking about the investment strategy try to accept the reality that we as individuals are prone to change. What
matters to you today , maybe a viewed in a inconsequential in a decade. Aiming at every point in your working life , to
have a moderate life saving , moderate free time no more than moderate commute, and at least moderate time with
your family .
3) Increase the odds of being able to stick with a plan to avoid regret than if any one of those things fall to the extreme
sides of the spectrum.
4) Adopting the long term perspective on financial planning can help you navigate changes to stay focused on your overall
goals. It’s important to balance short needs with long term objectives. In this author emphasize that the importances
of maintaining a long term perspective and being open to changes as needed.
5) Thus the author encourage the leaders to focus on the personnel growth can help you to align your financial plans with
your evolving values and goal’s. it is important to periodically reassess your priorities and make judgement periodically.
CHARLIE MUNGER once said that “ The compounding first rule is to never interrupt, but how do you not interrupt your
money, spending and investment it was hard. The Ronald Read, Warren Buffet become so important they kept doing the
same thing in a decade and letting the compounding run wild.”.
 18
NOTHING IS FREE

1) In this chapter the author explores the idea that everything has a cost , even it is not immediately apparent .
He argues the price of achieving of financial success often includes trade offs scarifies , and dealing
uncertainty.
2) Likewise everything else successful investing has demand a price , but it was a currency not a dollar or cent’s.
few investor has disposition to said that it was fine if they lose 20% of their money . When you invest in long
term and you will pay the price of the short term fluctuation.
3) You should view that there was fee rather than a fine. Disneyland ticket was 100$ but get a awesome day in
return that you ay never forget. The trick is was you may convince yourself that the market’s fee is worth it that
was only way to properly deal with the market volatility and uncertainty.
4) If you can do this you are more likely to stay in the market for a long term for investment gains to work for you
and as long as you stay in the market the odds of the winning was getting more and more as we the data of
investing in 1 year and for 20 years was 100 %.

“EVERYTHING WAS PRICE BUT NOT ALL PRICE ARE ON

THE LABELS “
 19
YOU & ME

1) In this chapter the author was highly recommended us going out of our way to identify whether we are. In this
the author tells us finding the personal financial identity and play your own game.
2) Long term investor who are optimistic in the world’s ability to generate real economic growth over the next
thirty years which will accrue to our investment. Short term investor who don’t really care about the price of a
stock will increase between now and lunchtime.
3) When investor have different goals and time horizon , price that looks ridiculous to one person can make sense
to another because the factor those investor pay attention to are different . When a commentator on CNBC
says “ that you should by this stock keep mind that do not know who you are . Are the teenager trading for the
fun ? An elderly low limited budget ?.
4) an hedge fund manager trying to shore up your books before the quarter ends ? Are we supposed that all
three people have the same priorities and that whatever level a particular stock is trading at is right for all
three of them ? It’s crazy.
5) Customized financial planning that takes into account individual differences can lead to better outcomes .
Tailor your financial plans and strategies to your specific needs and circumstances. In this author emphasize
the needs to focus on your personal goals and values rather than following a generic advise or comparing
yourself to others.
 20
THE SEDUCTION OF PESSIMISM

1) In this chapter author explores why pessimism often sound and more compelling than optimism , especially in
financial media and advice. He argues that while pessimism has it’s place, an overly negative outlook can
hinder financial progress and decision making.
2) The media uses fears to scare investors into making irrational decision about their investment. And it works
well because it is easier to create a narrative around pessimism because the story pieces tend to be fresher
and more recent. But the optimistic narrative require at a long stretch of history and development . Which
people tend to forget and take more efforts to piece together .
3) for example the 40% crash of stock market in six months will draw a congressional investigation but the 140%
gains in six years can go virtually unnoticed. True financial optimism housel posits , is to expect things to be
bad and be surprised when they are not.
4) Optimism is a belief that the odds of a good outcome are in your favour over time , even when there will be
setbacks along the way. Keeping the track of numbers rather than being accepting the advise, the numbers are
never been lie also other name called the facts .
5) while it is important to acknowledge risks and challenges , maintaining a balanced outlook that includes
optimism can lead to better financial decision. The author emphasizes that need to maintain balance approach
with a positive perspective on long term opportunities and growth.
 21 WHEN YOU’LL BELIEVE ANYTHING

1) The more you want something to be true, the more likely you are going to believe a story that overestimate
that odds of being true. For instance . After the world war one ended many people thought that there would
never be another world war . But the world war second in the 21 years later killing the 75 million people in the
globe.
2) The author writes that are many thing in the life that we think it was true because we desperately want them
in the true . He call this thing to be the appealing fiction and they have a big impact on how we think about
money particularly investment and the economy.
3) The people listen TV investment commentary that has little track record of the success ? Partly because the
stake are so high in the investment get a few stock pick right and you get rich without the much efforts. The
problem was that the people can’t calibrate low odds like a 1% chance . Many ta a firm belief that what they
want to be true is unequivocally true. But they're only doing that because the possibility of a huge outcome
exist.
4) Emotional decision making can lead to be believing in unrealistic financial promise and taking unnecessary
risks. It is important to approach financial decision with a clear as well as reasonable and rationale mindset.
“ Risk is what’s left over when you think you have thought of everything”
 22 ALL TOGETHER

1) In this chapter the author has synthesizes the key lesson from the book and emphasize the interconnectedness
of the various aspects of financial behaviour. He highlight the importance of understanding the psychological,
emotional and practical dimensions of money arrangement.
2) Adopting the holistic approach to financial planning that considered emotional, psychological and practical
strategies can lead to more sustainable and effective outcomes the author has emphasize the importance of
integrating various aspects of financial behaviour into a cohesive strategy.
3) Financial success requires continuous learning and adaptation . Staying informed and being open to new ideas
and strategies can help you navigate author evoking financial landscape. The author encourage readers to
remain curious and to continually seek knowledge and improvement in their financial practices.
4) Personal growth and development are key to achievement financial success and well – being . Focusing on self
improvement and aligning goals with personal value can lead to greater satisfaction and fulfilment. The author
highlight the importance of aligning financial decision with personal growth and overall well- being.

“Good times create good returns and bubble, bubble create bad
times,
Bad times created good opportunity, good opportunity crates
good returns , it was essentially creates good times.”
 23 CONFESSION

1) In this final chapter , housel shares his personal reflection and confession about his own journey. He discusses
the lesson he has learned and mistake he has made , offering candid perspective on the complexities of managing
money.
2) Half of the mutual fund manager in U.S are not invest their own money in the funds acc to the Morningstar. There
is no universal truth. There’s only what works for you and your family and leaves what leave you a comfortable
and sleeping well in the night. You have to find what works for you .
3) Here are the few thing the author mention in the books acc to Morgan the independence means doesn't mean
you all stop working it means you only do your work what you like with whom you like and for as long as you
want.
4) His investing strategy should pick the stock that has the highest odds of successful to meet their goals. He that
for most investors dollar-cost averaging into a low-cost index fund, leaving the money alone to compound, will
provide the highest odds of long-term success.
5) His 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. In
his opinion, it is the worst financial decision he has ever made but the best money decision he ever made.
 24 CONCLUSION

1. Thus in the end the author has send the some message to us as we follow in life are been mention below:-
2. The behaviour of the human are made according to the situation he have, in that luck and risk are made hard to
understand in it the human was have the power to identify both that leads to finding the you right role model.
3. Saving money was the gap between your ego and your income , and wealth is what don’t see some people
won’t sleep at night unless they earn the highest return, some people have sleep peacefully of conservatively
invested to each their own. But the foundation of “ does this help me sleep night.
4. The author emphasize the time in the market was a single most powerful tool of investor as we have the data of
long term horizon and his investor
5. Types of the finance cost which you should pay has sunk cost are doubt uncertainty and regret are the most
common cost in the finance the author suggest the people pay this has a fees rather than a penalty approach.

“ The conclusion was never the end of lesson

it has teaching derived from that , implied in
real life get lesson thus cycle continued”
25

THANK YOU