A Must Book To Read for Young Investors: The Psychology of Money
Many of us who are going to start our career whether as an employee or as an entrepreneur or want to invest in the share market must read the book- The Psychology of Money By Housel Morgan.
I have started my career as an employee almost one and a half years before, I had not started to plan my money — how much money should I save and how much money should I spend? We all have experienced the one thing as we get our first paycheck, we all tend up to spend money for our needs, and the dreams that we have seen we would complete as soon as we get our paycheck. In order to complete these dreams, we did not even realize that we are spending a very large proportion of our money and are not even planning to save and invest. This happens with a lot of people and It has also happened to me. I do not want to convey here that we should not spend money on needs and dreams but I want to say that we should try to save money and plan for the future.
Just 2 months ago, I came across this book, I ordered it and read it. This book very sensibly conveys the importance of saving money and investing saved money into the share market and also emphasizes planning what you want to do, when you want to do it, and with whom you want to do it.
Saving is a habit that we all should practice and it comes from keeping yourself disciplined.
The things that I have learned and understood from this book are as follows: 1. Every person can have a different expenditure pattern. One person can spend on lavish things while the other one can not, because no one is crazy. But you should not copy the way of spending of others.
2. Be consistent with your saving: You should consistently save and invest. How much you invest in totally depends upon your future needs.
3. Confounding compounding: when it comes to investing in to share market, you will always notice everyone emphasizing compounding. Compounding plays a very great role when you invest for a long time period. But people like you and me who are a newbie don’t understand the power of it. When you consistently invest money into the share market for a long period of time, you will feel the magic of compounding and your returns will be very high and amazing.
4. Patience: We all know that investing in share market brings the chance of profit as well as risk. You have to be patient while the market is plunging or some unforeseen event occurs. No one can predict with surety what will happen next in the share market. We all can make assumptions on the basis of past trends but what about those events that occur for the first time like a recession in 2008 or like a covid-19 pandemic. When the covid came last year, the economy was hit very badly, the market went down. But those who had been patient in that situation definitely earned more profit than those who had taken out their money from stocks.
I highly recommend all young professionals to go through this book once. I hope you will enjoy reading this book as well as learn more important lessons about money.