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The Psychology of Money

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Reasonable > Rational

(Chapter 11)

“Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable. Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters most when managing money.”

 

Historical odds of making money increase over time. Lesson: stick to your guns and don’t let short-term volatility force a bad decision. Example: Positive returns overa one-year period are 68% likely, 88% likely over 10 years, and 100% likely over 20 years.

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