The 1 Book I'd Recommend To Anyone Who Wants To Compound Wealth or Master Personal Finance
I'd even recommend reading it once every year
Over the past 25 years, I have read 100s of books on Money, Investing, and Behavioral Finance.
And while I enjoyed many of those books, and learned a lot, there is only 1 book I can say truly had a life-changing impact on me:
Psychology of Money by Morgan Housel.
Some of my biggest takeaways:
Financial success is not a hard science like Physics. It’s nuanced like a soft skill, where how I behave is more important than what I know.
My CFA & MBA degrees are irrelevant if I tend to make leveraged bets on highly speculative assets. My experience in the financial industry is irrelevant if I have built a lifestyle that I've become a slave to. Eventually, these tendencies will become fatal, as has happened umpteen times for people, but it only gets exposed when times are tough. And tough times could just be around the corner. So I got to be on my toes and prepared always.
My personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how I think the world works.
My parents lost everything when their business failed, and hence taking big financial risks is scary for me. I keep accumulating enough liquid assets, investing them across securities globally, and letting the compounding machine work in my favor. I live a simple lifestyle not letting luxuries take centerstage, leaving me with surplus always. Every single decision around money for me has its roots in what we went through as a family in the late 1990s.
Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort. They are so similar that you can’t believe in one without equally respecting the other.
I took the risk of sending my CV to 100+ placement agencies and I got through the interview rounds with Citi in 2005. 1000s would have done the same but may have not succeeded. I made some wrong calls financially and had to sell my property in India and take a lot of debt, till I got back on my toes in 2015 to chart a new path in Banking. I had a distant ex-colleague of mine that came to my help and I'd be forever thankful to him. 1000s never get a chance to crawl back out of the mess they land in. In either of these cases, I took some risks, and failed, but got incredibly lucky, and bounced back. Hence I don't solely credit my skills or knowledge. They wouldn't amount to much if not for the Goddess Fortuna.
To make money I didn’t have and didn’t need, I risked what I did have and did need. And that’s foolish. It is just plain foolish. If I risk something that is important to me for something that is unimportant to me, it just does not make any sense.
I have a PhD in this specific class of mistakes. I have lost money in so many ways that I could start a comedy club only cracking jokes on my blunders. Betting, Real Estate, Crypto, Leveraged Investments, Trading, Lending, Trusting the wrong people, Buying Equity stakes in Private Businesses - all these mistakes wouldn't be made if I didn't want more and more, despite having been lucky and resourceful. Never again am I going to chase what I don't need and don't have.
“Enough” is realizing that the opposite—an insatiable appetite for more—will push you to the point of regret.
I ought to call it a day when my eyes start hurting. I ought to wrap up work once I've finished as much as I could. I ought to stop eating once my stomach is full and there isn't any more space. I ought to stop when it's time. Chasing goals and making money also has its time and place, but I ought to know when to stop pouring intense energy and attention into this endeavor. If I don't, I'll burn out because this race to the top will never end. There will always be more goals to achieve and more successful people than me. It's a reality that I ought to embrace and I have.
These are just a few of my takeaways.
If you too are interested in Compounding Wealth and Mastering Money, I highly suggest keeping a copy of Psychology of Money on your desk and reading this gem once every year.
My favourite book :)