This chapter highlights some of the financial behaviors and beliefs of the author:
Independence drives all Housel’s financial decisions.
Live below your means.
Derive pleasure from free or low cost activities: exercise, reading, podcasts, learning.
Owns his house without a mortgage. Admits that this is a terrible financial decision but a great money decision (peace of mind).
Maintains 20% of his assets in cash (outside of the value of his primary home). He does this to maintain a safety net and to avoid being forced to sell his stock market investments in an emergency.
Charlie Munger: “The first rule of compounding is never interrupt it unnecessarily.”
No longer invests in individual stocks. All Housel’s stock market investments are in low-cost index funds.
“Some people can outperform the market averages—it’s just very hard, and harder than most people think.”
“Every investor should pick a strategy that has the highest odds of successfully meeting their goals…for most investors, dollar-cost averaging into a low-cost index fund will provide the highest odds of long-term success.”
Max out your retirement accounts and contribute to your kid’s 529 plans.
His financial situation is simple. All of his net worth consists of a house, a checking account and Vanguard index funds.
“One of his deeply held investing beliefs is that there is little correlation between investment effort and investment results.”
Three key elements of Housel’s approach: a high savings rate, patience, and long-term optimism.