Loved this post from Morgan Housel on Psychology of money. In Part 2 of my investment series I'll share some practical advices on how to build a portfolio, but Morgan nails in the head one element that is surprisingly hard to comprehend for most of the people I talk to on investment topics:
My own money is barbelled. I take risks with one portion and am a terrified turtle with the other. This is not inconsistent, but the psychology of money would lead you to believe that it is. I just want to ensure I can remain standing long enough for my risks to pay off. Again, you have to survive to succeed. A key point here is that few things in money are as valuable as options. The ability to do what you want, when you want, with who you want, and why you want, has infinite ROI.
Freedom (or "options", as Morgan calls it) is enormously important in investments. The key reason is that the economy runs in cycles. This means that you want to be able to take advantage of downcycles and especially you want to make sure that those same downcycles don't wipe you out. This is the reason why I never invest with leverage or borrowed money. I'm ok to take the risk to lose 25%, 50%, 75% of my worth (I hedge against that of course, but it can happen), because I know good times will come around. But if I go broke in bad times, I will have no chance to benefit from the growth cycles.