You’ve Been Taught That Success Is What You Know… Financial Experts Say That’s WRONG!

It’s What You Do.

Financial expert, Morgan Housel recently came out with a new book, The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness, which aims to explain why how we act matters more than what we know. According to Housel, there are people out there in the world who have no financial training, no financial education and no experience with money, says Housel, yet they manage to do quite well. Many, in fact, manage to morph into the “millionaire next door” type many of us strive to become. They live below their means, save and invest money like it’s their job, and build real wealth that lasts a lifetime without a lot of fanfare or ups and downs.

But Housel says the opposite is also true. There are Harvard MBAs and partners at Goldman Sachs who fail during the best financial markets and go bankrupt all the time.

Why is that?

Housel insists that this is where the psychology of money comes into play.

“What matters with finances and investing is how you behave,” he says. “It’s not what you know.”

For example, can you control your relationship with greed and fear? If not, then it doesn’t really matter how many hours you spent studying finance at Yale. Can you plan for the long-term and stay the course? If not, then you could have made any number of tragic mistakes in a year like 2020, and you may have no idea what steps to take next.

“These things cannot be taught in an academic setting,” says Housel. This is the “soft behavioural side of investing” that has little to do with numbers or math and much more to do with someone’s temperament and ability to just stay the course.

You can be the best stock picker in the world, says Housel. “But if you lose your head, none of it matters.