Money Lessons for the New Year

“I can calculate the motion of heavenly bodies, but not the madness of people.”
-attributed to Isaac Newton, offered in the context of Bitcoin

Actual advice from here:

1. Experiences shape your perception of risk.

2. Intelligence doesn’t guarantee investment success. Warren Buffett once wrote, “Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

I’ve met so many highly educated individuals who are terrible investors. They can’t control their emotions because their academic pedigree makes them overconfident in their abilities.

3. No one lives life in the long-term. Long-term returns are the only ones that matter but you have to survive a series of short-terms to get there.

Emotional intelligence is the true sign of investment smarts.

9. The biggest risks are always the same…yet different. The next risk is rarely the same as the last risk because every market environment is different.

On the other hand, the biggest mistakes investors make are often the same — timing the market, recency bias, being fearful when others are fearful and greedy when others are greedy and investing in the latest fads.

10. The market doesn’t care how clever you are. Trying harder doesn’t guarantee more profits.

12. Overthinking can be just as debilitating as not thinking at all. Investing involves irreducible uncertainty about the future.

18. There is a big difference between rich and wealthy. Lots of rich people are miserable. These people are not wealthy, regardless of how much money they have. 

Bonus from here:

When I started investing in 1987, grumpy old men would regularly warn that the market was overvalued and that stock investors would soon receive the punishment they so richly deserved. These market “wisemen” would point out that shares were richly valued based on yardsticks like price-to-book value, dividend yield and price-to-earnings multiples.

And yet, as the years rolled by, stocks kept getting more and more expensive, and those who listened to the grumpy old men were the ones who got punished. It eventually dawned on me that investors couldn’t divine the market’s future by studying valuation measures, and today I pay them scant attention.