For years, Smith Falconer Financial Group has routinely shared The Psychology of Money by Morgan Housel with our valued clients and business partners. We strongly believe that it is a book for all to enjoy – the recent graduate and seasoned investor, alike.

As we welcome 2024, we wanted to provide some additional perspective from Morgan Housel on achieving long-term financial goals, to be incorporated into the New Year’s resolutions of our readers.

Saving

• Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more options in the future.
• You don’t need a specific reason to save.
• Spending money to show people how much money you have is the fastest way to have less money.

Investing

• If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon.
• If you understand the math behind compounding, you realize the most important question is not, “how can I earn the highest returns?”, it’s, “what are the best returns I can sustain for the longest period of time?”
• View uncertainty, doubt and regret as fees (a price worth paying to get something nice in exchange), rather than fines (a penalty you should avoid).

In June of 2023, we discussed this same topic in our blog post, Patience is a Virtue, using the book’s insight on Warren Buffett, the richest investor of all time, as our example. We encourage you to re-read it.

To complement this, however, we want to highlight that Warren Buffett is a professional investor, and success in investing is not necessarily what you know about finance – it’s how you behave with money, regardless of your knowledge or skill-set.

This is why an an equally powerful example is that of Grace Groner and Richard Fuscone.

Grace Groner became an orphan at age twelve and worked as a secretary her whole life, living alone in a one-bedroom house – no spouse, children, or car.

Her savings that she left to charity in 2010?

$7-million dollars – built from eighty years of compounding in the stock market.

That same year, Richard Fuscone, former vice-chairman at Merrill Lynch, declared bankruptcy. With high-leverage and illiquid investments, the 2008 Financial Crisis took every last penny from him.

Compared with Richard Fuscone, a Harvard-educated seasoned investor, Grace Groner exemplified that how you behave is more important than what you know.

Morgan Housel explains that this behaviour must remain consistent when things go right, and wrong. In 2023, it was easy for investors to become discouraged with short-term underperformance due to macro-economic events; whereas it also presented an excellent opportunity to position an investor for further long-term success.

By reinforcing these themes, we encourage their integration into your 2024 investment mindset!

Happy New Year from the Smith Falconer Financial Group (SFFG)!