I recently read The Psychology of Money by Morgan Housel. It’s fascinating and well worth a read if personal finance is something that interests you.

Here are six takeaways.

1. Behaviour matters more than intelligence
One of the best-known stories in the book is that of Ronald Read, a janitor who accumulated more than $8 million over his lifetime through consistent saving and investing. He didn’t build a business, inherit wealth, or speculate in markets. 

He simply invested steadily over many decades (and was lucky enough to invest through an amazing bull cycle).

The point is that financial success is not primarily driven by intelligence, education, or professional status, but by behaviour over time. Discipline, patience, and staying invested matter more than trying to be clever.

2. Returns come with a price
High long-term investment returns are always accompanied by volatility. This volatility is not a flaw in the system. It is the cost of participation.

Even broad equity markets have experienced:

• Multiple periods of 20%+ declines (every second year)
• Occasional drawdowns of 50% or more (every 10 years or so)
• Years, and sometimes decades, where returns were flat after inflation (this is why we diversify)

These periods are emotionally difficult, but they are unavoidable. The long-term reward exists only because most people struggle to tolerate the short-term pain. Trying to earn long-term equity-like returns without accepting volatility usually leads to poor decision-making.

3. “Enough” Is a Critical Concept
People naturally compare themselves to others. This comparison rarely ends, because there is always someone wealthier.

One of the most dangerous financial errors is failing to define what “enough” means. Without a clear definition, people:

• Take unnecessary risks
• Increase leverage late in life
• Remain permanently dissatisfied with their financial position

A practical rule is this: Never risk what you already have and need for something you do not need.

This becomes particularly important once financial independence has been achieved.

4. Everyone has a different money story
What looks irrational from the outside often makes sense from the inside. People grow up with different experiences, pressures, and risks, and those factors shape how they use money.

From an investment perspective, this means:

• Not copying strategies blindly
• Matching portfolios to personal goals, income stability, and emotional tolerance
• Avoiding strategies that fall outside one’s own circle of competence

A strategy that suits a billionaire focused on capital preservation will not necessarily suit a professional still in the accumulation phase.

5. The biggest risks are unpredictable
Many of the events that have shaped markets over the past century were not forecast in advance: major wars, financial crises, and global shocks.

The practical lesson is that preparation matters more than prediction.

This includes:
• Sensible diversification
• Reasonable asset allocation
• Liquidity planning
• Sustainable withdrawal rates
• Emotional discipline during market stress

Trying to time markets around major events is exceptionally difficult and often works against you.

6. Pessimism is more persuasive than optimism
Negative news attracts more attention than positive news. Market crashes happen quickly and make headlines. Economic progress happens slowly and receives less attention.

This leads investors to:
• Overestimate short-term risks
• Underestimate long-term growth
• Make defensive decisions at precisely the wrong time

Being aware of this psychological bias helps investors remain more balanced when interpreting market commentary.

Closing thoughts

Reflecting on the book, there’s a clear theme that emerges. What’s interesting is that this theme isn’t what most people expect when they think about having a successful financial life. It has very little to do with being in the top 5% of earners or having superior stock-market insight.

It’s that long-term financial success depends far more on discipline, patience, and emotional control.

We can’t eliminate uncertainty, volatility, or risk. But we can structure our portfolios and our behaviour in ways that will give us the highest probability of success.

Matthew Matthee has a wealth management business that specialises in retirement planning and investments. He writes about financial markets, investments, and investor psychology. He holds a Masters Degree in Economics from Stellenbosch University and a Post Graduate Diploma in Financial Planning from UFS. MatthewM@gravitonwm.com 

‘We bring you the latest Garden Route, Hessequa, Karoo news’