The Psychology of Money

🚀 The Book in 3 Sentences

• You don’t have to be right all the time to make money in investing. Even being wrong half the time can still make you a fortune.
• Investing isn’t really about being right or wrong anyway—it’s about how much you make when you’re right, and how little you lose when you’re not.
• Raw intelligence isn’t the real edge. Soft skills and flexibility are the quiet superpowers that actually give you a bigger advantage.

🎨 Impressions

The author doesn’t really hand out investment tips or tell you what stocks to buy. Instead, he talks about our relationship with money—and honestly, that feels way more useful, especially if you’re an amateur investor. Looking at investing through an emotional lens just makes sense for an amateur investor, because emotions are usually the real problem, not the math.

In his view, the greatest return on investment isn’t just about money. It’s about having the freedom to do what you want, when you want, with who you want, and for as long as you want. He also makes you comfortable with the idea of being wrong. Making a bad call now and then is fine—what really matters is how much you make when you’re right and how much you lose when you’re wrong.

He keeps coming back to the power of compounding, and not just in investing. It shows up everywhere—in your career, your reputation, your relationships, and anything you stick with long enough. One idea that really stuck with me is this: success isn’t built during the easy, cruise-control years. It’s decided in the moments of fear, when things feel uncertain and uncomfortable.

📀 How I Discovered It 

From Ali Abdaal youotube channel.

🦉 Who Should Read It? 

Everyone and i means literally everyone doesn't matter whether youre a season veteran investor or just started to invest. As long you can keep check your emotion with your finances, you mostly will have a good read.

☘️ How the Book Changed Me 

• Compounding has a funny way of defying logic—it quietly fuels massive growth over time, whether you’re talking about skills or wealth.
• Investing isn’t just about skill; the real secret ingredient is time. Stack the two together, and that’s where the biggest rewards come from.
• If I want to be financially unbreakable, I need to stick around long enough for compounding to actually do its thing.
• Stay optimistic about the future, but just paranoid enough to protect myself from anything that could knock you out of the game.
• Investment success isn’t decided during the smooth years—it’s defined by how I react in moments of panic.
• Money buys you something far more valuable than stuff which is the ability control over time.
• You can build wealth on a modest income, made possible by having a high savings rate.
• In today’s hyper-connected world, flexibility beats raw intelligence as a long-term advantage.
• Compounding works best when you think in years and decades—whether it’s your career, relationships, or finances. Endurance is the real edge.
• It’s okay to take risks, but be deeply allergic to risks that could wipe me out. Surviving today is what allows me to take better risks tomorrow.

✍️ My Top Quotes

• History never repeats itself; man always does.
• Risk and luck are doppelgangers.
• I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging.
• Success is a lousy teacher. It seduces smart people into thinking they can’t lose.
• Getting money is one thing. Keeping it is another.
• If you’re terrific in this business, you’re right six times out of 10.
• If you remove just a few of Berkshire’s top investments, its long-term track record is pretty average.
• It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. You can be wrong half the time and still make a fortune.
• Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way.
• It is fine to have a large chunk of poor investments and a few outstanding ones.
• I did not intend to get rich. I just wanted to get independent.
• Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want.

📒 Summary + Notes

• success doesn’t necessarily due to hardwork, and not all poverty due to laziness.
• Do not risk something important for something unimportant.
• Never ignore compounding potential even it it small in the long run.
• Keeping money requires humility, fear of losing it back as fast as it comes, requires frugality and an acceptance some of what you made is attributable to luck.
• To gain and keep money, we need to have survival mentality.
  1. Few gains are so great that they are worth your effort.
  2. Counterintuitive math of compounding.
• Room for error / margin of safety
  1. frugal budget
  2. Flexible thinking
  3. Loose timeline
• conservative is different from error. Conservative avoid from a certain level of risk, while margin of safety is raising he odds of success.
• We need to have short term paranoia to keep us alive long enough to exploit long term optimism.
• Investor can be wrong half of the time but still able to make a fortune. This shows us that we underestimate how normal it is for a lot of things to fail and causes us to over react.
• Anything that is huge, profitable, famous or influential all comes from a tail event which is 1 in a thousand events. So focus on the core work or processes because good head navigation will result to this kind of tail events.
• Its not right or wrong that is important, its how much you make when youre right and how much you lose when youre wrong. You can be wrong half of the time and make a fortune.
• Highest form of wealth is the ability to wake up every morning and say i can do whatever i want today.
• When hou can control over what you want, when you want and with the people you want to is the best lifestyle that make people happy.
• Doing something that i love on a schedule that i can barely control feels like doing something that you hate.
• Rockefeller seems to spend most of his time sitting in what might perceive that it looks like free time or leasure hours, but he was actually constantly working in his mind, thinking problems through. That is what rockerfeller deliver, not with his hand but with his mind
• Your kids dont want your money. They only want your time.
• People want respect and admiration. Having expensive stuff will never bring it to you. This can be use remind your kids later.
• Nowadays, competetive advantages does not rely on intelligence but towards soft skills such communication, empathy and flexibility
• Aim to be pretty reasonable in financial decision to allow myself sticking to the gameplan in the long run rather than being coldly rational.
• The best investment stratergy lets you maximise how well you sleep at night.
• Infinite ROI: the ability to do what you want, when you want and as long as you want.
• Planning on your plan not going according to plan.
• Pessimism in money ensure we dont take unnecessary risk with it.
• Growth takes time, destruction happens in an instant. Same goes with building a company or building a reputation.
• come into terms to how much you dont know and control of your money.
• Invest takes time. Being a good investor is by leveraging time horizon. Longer time makes little things grow big and big mistake fade away.
• Respect and admiration comes from kindness and humility.
• In investing, uncertainty, doubt and regret is considered as a fee rather than fines amd super worth paying for it.
• Endurance = compound magic
• Financial decision usually happens in the dining table, instead of in spreeasheet or in text books as it comes with the intentions minimising dissapointment of your spouse and child.
• Long term success for average investor is to do dollar cost averaging into a low cost index fund.
• Effectively, my networth will compose of my house, checking account and my investment.
• The world is driven by tails, only a few variables account for the majoity of returns. Thats why theres only little correlation between investment effort and investment result.
• Investment tips is to have high saving rate, patience and optimism. But this need to be associated with intelligence investment because optimism does not necessarily resulting better gains.