It’s a daily struggle against instincts to extend your peacock feathers to their outermost limits and keep up with others doing the same.

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel

This quote explains for me why new fountain pen or gem enthusiast splurge on ever increasing dollars on inks, new pens and gemstones.

(Both are my interests but I no longer avidly collect them. I am a user more than a collector.)

Curiosity is first and foremost a big factor in hobby spend. For instance, a special new ink colour that we want to try it out for ourselves and talk about it, a new pen, a certain limited collection, a particular colour and cut of a stone – it all piques interest. The show and tell bit doesn’t get involved until the item is owned. The spreading of peacock feathers is not so much to brag about wealth but to show how up to speed, how in the know we are. When in a group of hobbyist, newbies are the biggest spenders, often buying a lot of both low and high value items. When the interest tapers off, there is a huge sell down/trade/give away of their collection. Mainly to limit it to those items that are used and usually without gains.

Another thing that I like is it explains risk management ideas in a layman language. It brings up the concept of uncertainty and explains the need for liquid capital to buffer against uncertainty. It explains that risk is not only something fearful but it is an opportunity as well. It highlights the use of money (ie savings) as a means of flexibility.

There are some bits I don’t agree with eg invest in a company that one is passionate about and the compounding stuff. I love Dairy Farm. I am still holding the loss making stock hoping for a turn around. The management is gromless and can’t figure out how to get the business back in shape but I really love the brand and the business. That is the only reason I am watching it lose more than 60% of it’s share price yet not selling it. The previous CEO left and they got a new guy from Walmart into the office in May this year and the stock continues to slide. The same adage about compounding didn’t always work out for me. I had an European ETF since 2008 and it continues to be loss making. A Chinese ETF made huge profits at first only to reverse and it is still loss making.

I suppose this book is like any investment. Sometimes you lose, sometimes you gain and like good portfolio allocation, this book is mostly gains.