Listen to Ted Richards in conversation with Morgan Housel, a partner at the Collaborative Fund. as they discuss investor psychology.
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In this episode of The Richards Report I’m speaking with Morgan Housel. Morgan is a partner at the Collaborative Fund. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism.
Morgan is someone I really admire and respect so I was very excited to speak with him. In my view he is the best financial writer in the world.
He doesn’t write about day-to-day market noise. He strikes a great balance between investing and psychology, and what we can learn from both behavioural economics and history. In the discussion we cover the following topics;
- How an avalanche when he was 17 taught him about risk – in particular, the consequences of risk from this event.
- How it’s the “out of the blue” events that really move the needle – tail events that only happen once or twice a decade, such as COVID-19 and the Global Financial Crisis.
- Luck and risk can be often indistinguishable from each other, but we recognise risk and rarely speak about luck. The reason being is that it’s almost disrespectful to say to someone a positive outcome was down to luck.
- How there is often a very thin line between success and failure.
- We need to be careful who we admire. Some notable people throughout history often glorified for their investing success experienced so much luck that no one could emulate what they achieved.
- Morgan speaks about how long-term returns are more of an outcome of your behaviour than how smart you are. Two examples he mentions can be an investor’s relationship with greed and fear, and also whether they can take a long-term mindset in short-term volatile periods.
- Investing for retirement is relatively new so we don’t have the generational knowledge transfer. Life skills like cooking or even driving a car have been past down through multiple generations, but saving for retirement hasn’t yet.
- People judge their own wellbeing by the people around them. When income inequality started to surge in the 80s in the US, it inflated the aspirations of others, which resulted in people taking on dangerous levels of debt and risk.
- A very small minority of the decisions you make will drive the vast majority of your returns. Often career returns by the best are determined by a very few investments.
- Morgan also outlines why investing in ETFs works for him
- Morgan has recently released a new book called The Psychology of Money and I highly recommend it.
- It has recently been announced that the book is going to be turned into a movie.
- There have been overnight tragedies but no overnight miracles. It means that it’s easier to pay attention to the setbacks but investors need to be optimists in the long run.
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Topics discussed are general in nature and for informational purposes only. This information and the information discussed in the podcast does not qualify as personal financial advice.