David Casas’s Reviews > The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness > Status Update
David Casas
is on page 172 of 242
Chapter 16 is great to re-read. He argues that financial bubbles don’t occur because long-term asset holders are buying at such a high valuation; he says that it’s because different people have different time horizons, so it makes sense for a short-term investor to buy at a high price if they know it’ll be higher at the end of the day. Home flippers and day-traders play on the same field as long term investors
— Oct 18, 2024 07:07PM
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Oct 18, 2024 07:10PM
I have to keep this in mind when valuing an asset. What is the current temperature in the market? Is it euphoria or a crash? Are we in a greed cycle or a fear cycle? Is the price of the asset reasonable? An indicator can be the volume of trading or home buying/selling, and how quickly asset prices are rising.
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A good tip is to clearly identify what game you’re playing. Are you a day-trader buying a stock to sell later today? A long-term investor who will buy and hold for 30 years? In investing, everyone is playing a different game with different rules, but they are all under the title “investor”. Define the game you’re playing, and your goal, and allow that definition to dictate what you pay attention to and what you should ignore. If some information is a part of a game that you’re not playing, ignore it.Is inflation up or down this month? Are interest rates higher or lower this month? If you’re a long-term investor, you shouldn’t care.
