Wealth mindset

You are not invincible. If you admit that luck brought you success,

the key to dealing with failure is to structure your financial life in a way that, even if you make a terrible investment or mess up your financial goals, it won’t crush you. This way, you can hang in there until the goddess of fortune arrives.

First, the hardest financial skill is stopping the chase after achieving the goal.

Second, social comparison is the core of the problem.

The point is, the ceiling of social comparison is too high; almost no one can reach it. This means it’s fundamentally an unwinnable war.

The point is, the ceiling of social comparison is too high; almost no one

The point is, the ceiling of social comparison is too high; almost no one can reach it. This means it’s fundamentally an unwinnable war,

if you want to know if you are a super glutton, the only way is to eat until your body gives out. Few people attempt to do this because even if the food is delicious, vomiting is even more painful. For certain reasons, this logic cannot be applied to business and investing, leading many people to continue pursuing more unless they are disgraced or influenced by external forces. This situation may manifest in ignorant behaviors, such as overworking or building a high-risk portfolio that they cannot control. More extreme examples include people like Rajat Gupta and Bernard Madoff, who adopt a sneaky approach because, regardless of the outcome, every penny is worth fighting for.

Third, “satisfaction” is not scarce.

Fourth, there are many things that are never worth the risk, no matter how huge the potential gain.

because he has been a skilled investor since childhood. As of where I am writing

Sophisticated investing doesn’t necessarily relate to earning the highest return, because the highest return is often a one-time strike opportunity that cannot be repeated. To earn a substantial return is related to what you can sustain and repeat over the longest period. That is seizing the moment of compounding acceleration.

Sophisticated investing doesn’t necessarily relate to making good decisions, but to consistently avoiding mistakes.

There is only one way to preserve wealth: combine a degree of frugality with obsession.

Getting rich is one thing. Preserving wealth is another.

Getting rich and preserving wealth are two completely different skills. To get rich, you must take risks and remain optimistic, bravely stepping out of your comfort zone.

Yes, getting rich and preserving wealth are two completely different skills. To get rich, you must take risks and remain optimistic, bravely stepping out of your comfort zone. But preserving wealth requires skills opposite to risk-taking; you must remain humble and worry that everything you have gained could be lost quickly.

Getting rich and preserving wealth are two completely different skills. To get rich, you must take risks and remain optimistic, bravely stepping out of your comfort zone. But preserving wealth requires skills opposite to risk-taking; you must remain humble and worry that everything you have gained could be lost quickly. Preserving wealth must be frugal and accept that at least part of your success is due to luck, so you cannot rely on past successes and repeat the same methods.

Long-term persistence, not easily leaving or being forced to give up. This ability should be the cornerstone of your strategy, whether you are investing, developing your career, or starting a business.

There are two reasons why a survival mindset is so important for financial management: The first reason is obvious: few things have returns so large that they would make you give up your life. The second reason is what we learned in Chapter 4: compounding is counter-intuitive math. Only by allowing assets to grow year over year can compounding take effect.

He didn’t carry debt. He went through fourteen economic recessions in his life, but he never panicked and sold off his stocks. He didn’t ruin his business reputation. He didn’t rigidly stick to one strategy, one worldview, or one outdated trend. He didn’t invest using other people’s money (he managed investments through a publicly listed company, meaning investors couldn’t withdraw their funds). He didn’t overwork himself to the point of having to quit or retire. He just survived. Surviving made him long-lived, and longevity means he could continue investing from age ten until age eighty-nine without interruption, allowing compounding to perform an astonishing miracle.

First, I don’t just want a large return; I want my financial situation to be unshakable. If I can make my finances stable, I truly believe I can achieve the greatest return, because I will have enough time for compounding to create miracles.

Compounding does not depend on earning a huge return. It is the sustained good return over a long period, especially during times of chaos and destruction, that makes you the eternal winner.

Second, the plan is important, but the most important part of every plan is continuously modifying the plan according to the plan, rather than rigidly sticking to it.

Third, extreme personality is important. People with this personality are optimistic about the future, yet they are obsessed with the things that hinder you from moving forward, like a maniac.

the moment, rather than the years-long process. For an investment genius, a good definition is: someone who can act normally when everyone else loses their mind.

For an investment genius, a good definition is: someone who can act normally when everyone else loses their mind.

is an important part of an investor’s personal behavior. Napoleon Bonaparte defined a military genius as: “someone who can act normally when everyone else loses their mind.” This applies equally to the investment field.

Napoleon Bonaparte defined a military genius as: “someone who can act normally when everyone else loses their mind.” This applies equally to the investment field.

The important thing is how much you earn when you are right, and how much you lose when you are wrong." You can mess up half the opportunities and still make a huge profit in the end.

Saying: “The important thing is how much you earn when you are right, and how much you lose when you are wrong.”

The important thing is how much you earn when you are right, and how much you lose when you are wrong." You can mess up half the opportunities and still make a huge profit in the end.

No one can make the correct decision all the time.

When you accept that the long tail drives everything in business, investing, and finance, you will understand that countless mistakes, failures, and collapses are completely normal phenomena. If you are a shrewd stock picker, perhaps half the time is correct. If you are an excellent business leader, perhaps half of the product and strategy ideas are viable. If you are an outstanding investor, you might have done quite well for many years, but done poorly for many years. If you are a good employee, you will find that after several attempts and trials, you can find the right company in the right area.

Take Amazon as an example. The idea that it is normal and good for a large company to launch a failed product goes against intuition. Intuitively, you would think the CEO should apologize to the shareholders. But when Amazon’s Fire Phone failed miserably, CEO Jeff Bezos quickly stated: If you think this is a major failure, then we are actually brewing a bigger failure right now. I am not joking. Some of the plans will make the Fire Phone look like a trivial matter.

Controlling your time is the highest dividend money can pay you.

Controlling your time is the highest dividend money can pay you. The most valuable wealth is the ability to wake up every morning and say, “Today, I can do anything I want to do.”

The greatest intrinsic value of money is the ability to give you control over your time; this cannot be emphasized enough. To gain a certain degree of independence and autonomy little by little, the unused asset can give you the greatest control, allowing you to do what you want, when you want.

40-50% of Americans say they felt “very worried” the day before, [27] but the global average is 39%; 55% of Americans say they felt “very stressed” the day before, but the global average is only 35%. The reason this happens in the US is partly because we tend to spend more money to buy bigger, better products, but at the same time, we give up more control over our time. At most, the effects of these things ultimately cancel each other out.

John Rockefeller was one of the most successful businessmen in history, but he was also a recluse, spending most of his time alone. He rarely spoke, deliberately creating a difficult-to-approach distance; even if you caught his attention, he adhered to the principle that silence is golden.

The wise old owl rests on the oak tree. The more it sees, the less it speaks; the less it speaks, the more it listens. Why can’t we be like the wise old owl?

For most people, even though he spends most of his time sitting quietly, looking like he has nothing to do or is just passing the time, his mind is constantly busy, thoroughly thinking about problems.

Wealth is actually an invisible asset. Spending money to show off how rich you are is actually the fastest way to become poorer.

We often judge wealth based on what we see with our own eyes, because that is the information presented to us. We cannot see other people’s bank accounts or transaction statements, so we can only rely on visible things to measure financial success, such as cars, houses, or photos posted on Instagram. Modern capitalism helps people fake it until it becomes a valuable industry. But the truth is, wealth is actually an invisible asset. Wealth is the luxury car not yet purchased, the diamond not yet acquired, the expensive watch not yet worn, the clothes you choose not to buy, and the first-class seat you refuse to upgrade to. Wealth is the financial asset that has not yet been converted into physical goods in your hand.

Enough. The only way to get rich is not to spend the money you have.

Therefore, people’s ability to control savings is far greater than they imagine.

People’s ability to control savings is far greater than they imagine. Spend a little less, and you can save a little more. As long as you want to spend a little less, you can spend a little less. And if you don’t care as much about what others think, your desires will decrease. As I often mention in the book, the amount of money is more often determined by psychological state than by financial condition.

Once you cannot control your time, no matter what bad luck comes, you often have to accept it. However, if you have time flexibility, you can wait for an opportunity to suddenly fall from the sky without effort, and this is the invisible reward that saving gives you.

Reasonable trumps rational. Focusing on the majority of reasonable actions is better than trying to maintain rationality without emotion. You are not a spreadsheet; you are a living person. You are a person who makes mistakes and has emotions.

Right? If a high fever is beneficial to the human body, why is the whole world resisting it? I think the answer is easy to understand: a high fever harms the body. We don’t want to be harmed. That’s that simple.

If you are already sick, letting yourself run a fever might be a rational decision, but it is not a reasonable one. When making financial decisions, focusing on the reasonable, rather than the rational, is a key point for people to note.

Yes, people are neither rational nor irrational. We are ordinary people. We don’t like unnecessary thinking, and we constantly raise the requirements for our intentions. From this perspective, it is not surprising that the pioneer of modern behavioral finance rarely considered his own research methods when building his initial portfolio; later, when he adjusted his portfolio, it was also not surprising. [

A point often overlooked in the financial field is that something is technically

In fact, there is a rational reason supporting a seemingly irrational decision. Let me tell you what it is: you love your investment. This is not traditional advice. For investors, claiming to be emotionless about an investment is almost a badge of honor, because it looks very rational.

Surprise! History is the study of change, ironically, it is used as a map for the future.

It is wise to deeply understand economic and investment history. History helps us adjust expectations, study where people often make mistakes, and provides a potentially effective general reference. But from any perspective, it is not a map of the future.

First, you are likely to miss many abnormal events that cause impact.

Second, history may be a misleading guide to the future economy and stock market, because it does not consider the structural changes closely related to today’s world.

For investors, it is necessary to consider building in a margin for error in certain areas.

Margin for error. The most important part of every plan is to plan for your plan, not to execute according to the plan.

We don’t have to view the current world as black and white, predictable, or purely based on luck. The so-called “gray area” refers to pursuing a potentially acceptable outcome—that is the smart way to move forward.

Almost everything involving money needs a margin for error, but people often underestimate the necessity of doing so.

We don’t have to view the current world as black and white, predictable, or purely based on luck. The so-called “gray area” refers to pursuing a potentially acceptable outcome—that is the smart way to move forward. Almost everything involving money needs a margin for error, but people often underestimate the necessity of doing so.

Two things make us unwilling to build in a margin for error. First, acknowledging the opposite fact brings an uncomfortable feeling, leading people to have the idea that “we must know what the future will be.” Second, you fail to take action based on the precise view of the future coming true, thus making decisions harmful to yourself.

Building in a margin for error allows you to tolerate a series of potential outcomes, and this tolerance allows you to hold firm to your position long enough for this opportunity—which benefits from low-probability outcomes—to fall into a favorable situation for you.

“Excess profit.” For investors, it is necessary to consider building in a margin for error in certain areas. The first area is volatility. When asset values drop by 30%, can you hold on? From an electronic form perspective, meaning from the condition of actual payments and maintaining positive cash flow, the answer might be yes; but what about the psychological feeling? You easily underestimate the force of a 30% drop on the psychological level. When it drops to the lowest point, your confidence may be severely shaken. You or your spouse may decide it is time to start a new plan or launch a new career. I know some investors exit after losses because they are exhausted, both physically and mentally.

For investors, it is necessary to consider building in a margin for error in certain areas. The first area is volatility. When asset values drop by 30%, can you hold on? From an electronic form perspective, meaning from the condition of actual payments and maintaining positive cash flow, the answer might be yes; but what about the psychological feeling? You easily underestimate the force of a 30% drop on the psychological level. When it drops to the lowest point, your confidence may be severely shaken. You or your spouse may decide it is time to start a new plan or launch a new career. I know some investors

For investors, it is necessary to consider building in a margin for error in certain areas. The first area is volatility. When asset values drop by 30%, can you hold on? From an electronic form perspective, meaning from the condition of actual payments and maintaining positive cash flow, the answer might be yes; but what about the psychological feeling? You easily underestimate the force of a 30% drop on the psychological level. When it drops to the lowest point, your confidence may be severely shaken. You or your spouse may decide it is time to start a new plan or launch a new career. I know some investors because they are exhausted.

The solution is simple: when estimating future returns, first build in a margin for error. This approach is more like an art than a science. In my investing, as I elaborate in Chapter 20, I assume that the future return in a lifetime will only be two-thirds of the historical average. Therefore, if I believe future savings will be similar to the past, I will save more money—this is my safety margin. If the future might be one-third worse than the past, then there is no safety margin to provide 100% guarantee. The one-third buffer is enough for me to sleep soundly at night. But if the future is vastly different from the past, I will be overjoyed. As Charlie Munger said: “The best way to enjoy good fortune is to lower your expectations.” What a great saying.

Not worth taking any risk that will destroy you. When you play Russian roulette, the odds are in your favor, but the unfavorable factors are not worth betting on the potentially favorable factors. There is no safety margin sufficient to compensate for such a risk.

Here, leverage is the devil. Leverage refers to carrying debt to make your money work harder, thereby elevating routine risk to a kind of potentially catastrophic crisis. The danger is that rational optimism usually glosses over the probability of a risk that might explode at some point, resulting in us systematically underestimating risk. In the last decade, real estate prices dropped by 30%, and some companies defaulted on debt—this is what happens in capitalism. However, those who use high leverage suffer a double blow: not only are they ruined, but they are eliminated from the market, and when the future opportunity arises again, they have no chance of a comeback.

To avoid this problem, I divide my money into two uses. One part takes risks, and the other part is cautious and fearful. This approach is inconsistent, but the mindset of getting rich makes you believe it is a consistent approach. I just want to ensure that I can survive long enough for the risk I take to yield a return. You must survive to succeed.

There is no such thing as a free lunch. Everything has a price, but the price is not fully written on the label. Everything has a price, and among the many things related to money, the key is to find the price tag and willingly pay for it. The problem is that the price tag for many things is not obvious unless you have first-hand experience, but by then, the bill is often already due.

Volatility is like a transaction fee, not a penalty.

Volatility is like a transaction fee, not a penalty. Market returns are never free, and they will never be free. They will demand a price from you, just like any other product. You are not forced to pay, just as you are not forced to go to Disneyland. You could go to a local fair with a ticket price of ten dollars, or stay home for free. You might be just as happy, but usually, you get what you pay for. The market is the same. The cost of volatility/uncertainty—that is, the price of obtaining a return—can be called the entry fee, allowing you to obtain a return far higher than the low-cost fairs offered by cash and bonds.

You and me. Be careful of the financial clues obtained from players playing another game.

Investing vs. Speculation? Wealth Preservation!

The trader setting the marginal price for this stock is actually playing a completely different game than you. For these traders, sixty dollars per share is a reasonable price because they plan to sell the stock before the market closes that day, at which point the price might be higher.

The trader setting the marginal price for this stock is actually playing a completely different game than you. For these traders, sixty dollars per share is a reasonable price because they plan to sell the stock before the market closes that day, at which point the price might be higher. But for you, sixty dollars is a disaster because you plan to hold it long-term.

I am a passive investor, optimistic about the ability of the world to create real economic growth, and I am confident that this growth momentum will benefit my investments over the next thirty years.

If you say the world is getting better, your outcome might be being mocked as overly naive and slow; if you say the world is about to get better, people will think you are crazy and embarrassed. Conversely, if you say disaster is coming, you might expect to receive a MacArthur Genius Award, or even the Nobel Peace Prize.

Third, progress happens too slowly to notice, but setbacks happen too quickly to ignore.

It is relatively easy to conceive of a narrative centered on pessimism because the story fragments are usually newer and more recent; an optimistic narrative requires reviewing a long history of development, and people often forget, requiring extra effort to piece it together.

There is also the stock market: a 40% drop within six months will cause Congressional investigation, but a 140% rise within six years is barely noticed by anyone.

I look at this city, I inspect the factories. You all still possess the same knowledge, the same tools, the same ideas. Nothing has changed! Why are you getting poorer? Why are you becoming more pessimistic?

The economic story we tell ourselves. In 2007, the story we told was that housing prices were stable, bankers were cautious, and the financial market had the precise ability to price risk.

This alien did not see a change that occurred between 2007 and 2009: the economic story we tell ourselves. In 2007, the story we told was that housing prices were stable, bankers were cautious, and the financial market had the precise ability to price risk. In 2009, we stopped believing that story. That was the only thing that changed. But it changed the whole world. Once the narrative of continuously rising housing prices was broken, mortgage defaults began to climb, followed by bank losses, and then they would reduce lending to other businesses, leading to layoffs, which in turn led to reduced corporate expenses, leading to more layoffs, and so on.

The story is the most powerful force in the economy; it is the fuel that drives some real economy operations, or the brake that hinders our ability.

First, the more you want something to come true, the more likely you are to believe a story that overestimates the probability of it happening.

Wishful Thinking

When you are broke and your son is sick, you will believe anything.

People are more obsessed with prophecies and astrology, dreams and nonsense than ever before… the astronomical calendar scares them… the house and street corners are covered with doctors’ advertisements and articles by ignorant people, inviting people to come and adopt their therapies, usually written in grand flourishes: “Preventive medicine that is foolproof against plague,” “Preservative with zero infection risk,” “Court beverage to defeat corruption.” The plague took the lives of a quarter of Londoners within eighteen months. When the risk is so high, you will almost believe anything. Now, consider how the same limited information and high risk affect our financial decisions.

The greater the gap between “you want to believe something is true” and “you need to believe something is true in order to achieve an acceptable outcome,” the better you can protect yourself from being harmed by attractive financial fictions.

Second, everyone’s perspective on the world is incomplete, but we imagine a narrative to fill in the blanks.

“Risk is what remains when you think you have considered everything else.”

We need to believe that we live in a predictable, controllable world, so we consult experts who sound authoritative, promising to satisfy that need.

Use financial management in a way that allows you to sleep soundly at night. This is different from saving a certain rate of return or saving a certain percentage of income. Some people cannot sleep soundly unless they earn the highest return; others must invest conservatively to rest easy. Everyone has their own idea. But for all financial decisions, “Will this help me sleep soundly at night?” is the universal guiding principle.

Less ego, more wealth. Saving is the gap between the self and income.

Less ego, more wealth. Saving is the gap between the self and income. And wealth is an invisible asset, so when you suppress the urge to shop today in order to have more things or more options in the future, wealth is created.

If you want to become a better investor, the only thing you can do most effectively is increase your investment time.

It doesn’t matter if many things go wrong. Even if half the time is wrong, you can still get rich, because a tiny fraction of things will produce the vast majority of the results.

Use money to reclaim control over your time, because not controlling your time severely affects happiness.

Become better, and be less boastful. No one cares about your possessions as much as you do. You might think you want a luxury car or an exquisite watch, but what you really want might be other people’s respect and envy. You are more likely to get these through kindness and humility, rather than through sheer horsepower and high-grade chrome.

Confirm the cost of success, and be prepared to pay for it. Because there is no such thing as a free lunch. Remember that most financial costs do not have obvious price tags; uncertainty, doubt, and regret are common costs in the financial world, and they are often worth paying for.

Confirm the cost of success, and be prepared to pay for it. Because there is no such thing as a free lunch. Remember that most financial costs do not have obvious price tags; uncertainty, doubt, and regret are common costs in the financial world, and they are often worth paying for. But you must view them as costs—that is, the price worth paying for certain good things—rather than (the penalty you must avoid).

Please build in a margin for error. The things that may happen in the future, and the things you want to happen to successfully complete your plan, the gap between the two is what gives you endurance, and endurance is the key to allowing compounding to perform its magic over time.

Avoid making financial decisions that will lead to extreme outcomes. Everyone’s goals and desires change over time, and the more extreme your past decisions, the more you might regret them as things evolve.

You should like risk, because over time, it brings returns. But you should be obsessive about destructive risk, because it will prevent you from getting returns from future risks.

Confirm the game you are playing, and ensure that your actions are not influenced by players playing another game.

Respect chaos. Smart, insightful, reasonable people in the financial field may not have the same opinion, because everyone has different goals and desires. There is no single correct answer, only the one that suits you best.

“The primary principle for letting compounding work is: absolutely do not interrupt it if you don’t have to.”