wisdom from Morgan Housel.
In many fields, particularly investing, you can make more progress getting ahead by avoiding mistakes than you can making brilliant decisions. Charlie Munger put it this way: “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
Investing is simple, but surprisingly difficult. Especially for individual investors, the idea of “Buy some index fund, add a little bit each month, leave it alone for 30 years” is painfully simple, yet something only a small group of investors actually pull off.
Here’s Charlie Munger again on how hard it is to let go of a fact even when it eventually changes:
"The human mind is a lot like the human egg, in that the human egg has a shut-off device. One sperm gets in, and it shuts down so that the next one can’t get in. The human mind has a big tendency of the same sort. According to Max Plank, the really innovative and important new physics was never really accepted by the old guard. Instead, a new guard came along that was less brain-blocked by its previous conclusions."
Things many investors strongly believe but are likely wrong about include:
“I understand my risk tolerance.”
“I’m unemotional about money.”
“I’ll get out before the market turns.”
“I’ll buy back in after the crash.”
“I know something about this company that others don’t.”
“The recession was caused by [x].”
So many of us believe these things. And so many of us are completely wrong about them.