Edition #19: When Wealth is Not Yet Real

Plus: Optimism Bias, Buffett on America, Best debit Card for travel

Today’s compliment: you live a rich life.

In this newsletter, I’ll start with a rant about paper wealth, then followed by nuggets on psychology & money.

🦄 When wealth is not yet real

Headlines like Jeff Bezos Just Made $3 billion in 20 minutes and Elon Musk loses $30 billion misrepresent the mechanics of wealth. Net worth measured in fluctuating stock prices is paper wealth. Until those assets are sold, literally realized, then no money has been made yet.

I need this whenever my portfolio is doing well. Many investors threw darts at the market in the past year and landed on bullseyes. One of the dangers of quick investing success is adjusting to a false sense of wealth.

Let’s say someone’s high growth portfolio increased dramatically to $1 million for the first time. This investor might be tempted to act like a millionaire in their spending habits or how they relate to others. It’s probably more accurate to think “My portfolio is worth $1 million at this point in time. This could change any time until I take profits and pay taxes.”