Morgan Housel: “The biggest failure of the investor is not knowing himself”

Morgan Housel: “The biggest failure of the investor is not knowing himself”

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Morgan Housel: “The biggest failure of the investor is not knowing himself”

Analyst Morgan Housel.

Morgan Housel, an economic analyst who was for years one of the most popular columnists in the Wall Street Journal, is a partner in The Collaborative Fund, a venture capital firm focused on the shift from a property-based economy to an access- or access-based economy. exchange of goods. In his book How the rich think Published in Spanish this year, it examines the relationship people have with money and what they really want from it. A short and very entertaining manual, full of allusions to the most famous Wall Street investors and also to those strangers who ended up on the front pages of the newspapers. The hero of this entertaining essay is Ronald Read, a Vermont janitor and gas station man who died at the age of 94 with a fortune of eight million dollars. The key to his success was saving what little he could in safe securities. Time did the rest. Quite the opposite Richard Fuscone, Merrill Lynch Executive Trained at Harvard, after a life of luxury, he went from being among the most successful entrepreneurs to going bankrupt after the 2008 crisis. One was patient and the other was greedy, says Housel in his book. And at these two extremes moves a realistic, sincere and no magic recipes about the investment world. The goal of this two-time Best in Business Awards-winning author’s work is to convince the reader that emotional skills are more important than technical knowledge about money.

Question. You say in your book that the 2008 crisis created a type of investor. Also the previous crises have shaped different investors. What type of investor will be born from the one caused by covid-19?

Answer. I think we will end up with investors who will see the world as “bankrupt” roughly once every 10 years, surely fewer in favor of taking big risks and getting into debt, and more wary of unknown risks.

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P. The last chapter of his work deals with his own investments. How has your money been in the last few months of markets sinking and then rebounding with unexpected force?

R. I am an index fund investor so, like other people, my portfolio lost around 30% in March 2020 and ended the year at highs never seen before. It has been a very crazy year.

P. Is your book missing a chapter on how to spend money? For some, their praised Ronald Read may be nothing more than a “loser” who led a very simple and austere life, eventually leaving his $ 8 million to his stepchildren and to the Vermont library and hospital.

R. It is so different for each person… I just want independence in my life, to be able to control my time in the face of the accumulation of many things. I think Ronald Read had a great life. He dedicated himself to what he loved and made a difference in his community.

P. Do you think you have to invest in a lot of stocks to achieve that “extreme success” that has made people like Warren Buffett famous and rich, whom you quote frequently in your book?

R. Diversification is a must. I don’t think anyone should try to become the next Warren Buffett. If you have 100 stocks or more, you are basically betting on humanity and this is a wonderful long-term bet.

P. You continually emphasize the freedom that savings offer. Is saving essential in a society like this, with less security, simply to survive? And those who cannot save?

R. The appropriate amount of savings exists within a range. Someone with five dollars saved has a degree of independence that someone with zero dollars does not. Every little bit counts.

P. He indicates in his book that the experience is useless or counterproductive for investment. This statement would kill big mutual fund managers earning astronomical numbers.

R. Each person relies on their own unique personal story. It is very important to try to consider the views of people from different countries and different generations who have had a different experience than you. They will open your mind to a range of possibilities that you may end up experiencing in your own life.

P. You highlight leverage as the great demon for investors. What are others that the investor should avoid?

R. Overconfidence, fees, financial means designed for entertainment, and following the signals that come from people who are playing a game other than yours.

P. In your opinion, bubbles are produced by an accumulation of short-term investors, do you see any bubbles right now? In what?

R. I think bubbles are only known in hindsight. So it’s hard to tell. Much of financial history can be boiled down to the fact that unsustainable things can last longer and grow much larger than previously thought.

P. It is clear that his work is not a cookbook to get rich. What are the most common mistakes that the investor makes?

R. I think the biggest failure is simply not knowing yourself: what are your goals, how much risk can you take, what do you really want in life. Many investors do things that might work for other people, but are a mess relative to their own personalities.

P. Although you are averse to imitating what other famous and prestigious investors have done, which one do you most admire of the many you cite in your book?

R. Charlie Munger – vice president of Berkshire Hathaway, the conglomerate controlled by Warren Buffett – has had an extraordinary life. He has overcome many tragedies; I’m not saying I want to have his life. But I think as he gets closer to the end, he will look back on his life and say, “It was amazing. I’ve done my best. ” He is an exceptional person.

P. A concept that handles in the book is enough. Know that you have enough and don’t be blinded by greed. Something that, as he indicates, was not so clear to the late Bernard Madoff, among many others. Are you clear about the concept of sufficient that applies to investors about the books you want to sell?

R. It’s a great question, I love it. Sales of the book have surprised me greatly; everything is being very positive considering my expectations. If sales fell to zero tomorrow, I would still be very happy with how everything turned out.