2 Powerful Habits to Master for Success in Psychology of Money

Control your emotions to be a better investor

Psychology Godfather Investing

Being a good investor is 80% psychology and 20% strategy. So, I will give you 2 powerful habits to master for success in psychology of money. No matter how smart you are, you will be a good investor if you know the rules that I will tell you in the following article and how to apply them in your daily life. That’s all there is to it.

Many will say that it is a lie, but the investment with the most straightforward strategy that exists involves less psychological component is the investment in index funds. It consists of buying all the companies worldwide by capitalization and repeating the process regardless of what happens in the markets.

At ten years, this strategy beats 90% of active investors, at 20 years 98%, and at 30 years 99%. 

“Godfather, this seems to make sense!”

James Montier is one of the most knowledgeable, and I am going to present his “commandments” with a personal touch:

1. Preparation, planning, and prior commitment to a strategy:

Perhaps with this first one, I could end the article.

    • Preparation: educate yourself as much as you can. Understand the assets you are investing in, whether funds, stocks, options, private equity, cryptocurrencies, start-ups, etc. Understand the underlying.
      Learn from the best, read everything you can. It’s your money, and making the most of it and living a life of abundance depends on it, don’t leave it to chance.From my point of view there are three assets I would put much more emphasis on:
      • 1. Funds: Analysts cover particular stocks and dedicate the most complex tools you can imagine to their analysis. You are not going to be better than them, and, most importantly, if there is some fraud on the part of the company, you are not going to know until your stock has fallen 80%.
        Focus on funds, the ones I like the most are index funds (Amundi, Vanguard, or iShares), but there are exciting value and growth funds.
      • 2. Options: you want to make a lot of money, you have come to this world to live well, and you know that if you try, you will never regret it. Learn about options. They allow you to leverage yourself like a private individual. But for that, you have to know how to use them. Going short of some can become a weapon of mass destruction, and you must learn as part of the preparation.
        In addition to knowing how to operate well with options, you have a lot of money that you have made with your online business (how to create it from 0, you can find it in my success path) will allow you to go from millions of dollars to tens or hundreds of millions. My friends at Asymmetric Finance are the ones I like the most is how they handle choices. The day they get it right, it will be a home run. Start by reading Taleb in this order: Black Swan, Antifragile, and Dynamic Hedging, and continue to specialize in the area of options that most interest you.
      • 3. Cryptocurrencies: whether you like it or not, it is the future. Today there are a thousand very profitable alternatives. Every day you lose without knowing about them, you lose money. DeFi, NFTs, Smart Contracts, web 3.0, etc. These are concepts that you must learn. Projects that I like and where I have money invested are Luna (DeFi, learn from their protocols and Mirror), Polkadot and Kusama (Web3.0, learn from their parachains), BNB and ETH2.0 (Smart Contracts), among others.
    • Planning: I already know enough to start investing. Godfather, how much is enough? Enough is to sleep peacefully even if the asset you invested in drops 90%. If you sleep peacefully with that investment, you know it is enough.
      Now plan, for this, you have to solve the following questions:
      How much are you going to contribute per month? What is your investment period? Is it money that I don’t need? Once you have done this exercise, you can define the strategy.
    • Strategy: this is 20% of your returns. Here, I have to say what percentages I invest in each asset and what buying/selling policy I will follow. As a general rule, I would say that once you know the rates, you should put your money there and touch it as little as possible.
      Rebalance every six months or a year. That’s enough.A simple strategy for the whole family: 50% in the MSCI World, 10% Cash, 20% Cryptocurrencies, and 20% in something riskier like options.But here, let everyone do their research.

2. Reinvest when the market is panicking:

In the previous strategy I have left a part in cash, from my point of view it is essential (the percentage you choose).

The market in the long term behaves like crypto in a short time. There are periods when it goes down, it seems that the world is coming to an end, but it always recovers.

We must be optimistic and trust in the progress of society. Otherwise, we are lost. Let’s put our money in an index fund or the bank. Therefore, we must invest when everyone is terrified.

There is an expression that I love, and it is:

“Invest like you are pouring buckets of water in the desert.”

If you invest averaged during downturns, it seems like you put money in every time. It goes down. You are doing it right. Remember that everything in life that takes suffering at the time of execution usually carries a reward in the future: dieting, building an online business for six months starting at 4 am, training, investing when everything drops, etc.

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See you soon.

Best regards

Godfather Investor

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.