“If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. Time is the most powerful force in investing. It makes little things grow big and big mistakes fade away.”
Start investing young was the advice I got. At 22 I opened a Roth IRA.
But there was a nuance I failed to note. It’s not just about time horizons but also how to get there.
Young Mike opened a Roth knowing it should compound for a long time. But he didn’t think about how that might happen.
Save 3-6 months of living expenses was another piece of advice. This is an average lie. It’s not enough or too much. We should call them “repair funds” because emergencies are not covered.
Emergencies need a year or more.
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In Nomadland, Jessica Bruder writes about “house-less” Americans. With RVs and campers, these ‘nomads’ travel the country for work. Do you know how busy Amazon gets at the holidays? It’s these people working there. Seasonal National Parks? That’s them too.
Generally, four events precede someone becoming nomadic: health, house, job, spouse. Mary Smith or her significant other lost their _____ and now she’s nomadic. Three months of savings for that? Get out.
But that’s tough. So much time horizon is eaten up by savings accumulation – which an individual may never need! In hindsight I see all of Young Mike’s mistakes. But he didn’t think they were mistakes at the time.
This balance is what makes Morgan’s book so good. It’s not black and white numbers. It’s messy. It’s color. It’s holistic, it’s an ecosystem. You never do just one thing.
I didn’t read The Psychology of Money when it came out because I’ve read a lot of Morgan’s memos, followed him online, and written about personal finance. But the book is good. It’s not about money as much as it’s about morals.
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