There are measures of risk that have some degree of utility when it comes to framing investors’ expectations. But risk cannot be properly measured in a spreadsheet. When it comes to money and investing, we’re not always as rational as we think we are—which is why there’s a whole field of study that explains our sometimes strange behaviour.
Joachim Klement, physicist and mathematician turned strategist and author, shares some fundamental and timeless advice.
In How to Be a Great Investor, he shares an interesting perspective and ends with four practical tips. Here are some more thoughts.
How many times have you been told that you need to distinguish between a “need” and a “want”? Innumerable, is my guess. Everyone who has tried to draw a monthly budget would have attempted this classification. Ironically, it is the predominant reason why people find it difficult to live within a budget.
Behavioural finance rests on a simple premise: The biggest risks in investing are embedded in ourselves as decision makers. Biology encourages our brains to take cognitive shortcuts that can cause big problems.
It’s better to be wealthy than rich, even if you’re poor. – Author and NYT columnist, Paul Sullivan
That is the most accurate line I have come across in the context of being wealthy. And we are going to present you with three interesting stories that will help you understand.