Two people can follow the same investment method and get opposite results. The difference rarely lies in the method: it lies in the person. Knowing yourself means choosing a strategy you will be able to stick to when everything goes wrong.
Why self-knowledge comes before money
By understanding your strengths, weaknesses and motivations, you can:
- make decisions aligned with what really matters to you;
- recognise the opportunities that suit you, and turn down those that suit other people;
- build a strategy you will stick to for ten or twenty years.
Most money losses do not come from a bad calculation but from an emotion: fear that makes you sell at the bottom, envy that makes you buy at the top, impatience that makes you believe in a shortcut.
- ValuesWhat matters to you
- GoalQuantified and dated
- StrategySuited to your attitude to risk
- ActionKept up over time
Pillar 1: your values and your ‘why’
‘Being financially free’ is too vague to motivate you on a Monday in November. Be specific:
- Free from what? A boss, working hours, a place?
- Free to do what? Travel, watch your children grow up, create, help?
- When? In 5, 10, 20 years?
A written, quantified and dated goal turns into a plan. Napoleon Hill made it the first of his principles, and it is probably the soundest one in his book (see our article on Napoleon Hill).
Pillar 2: your attitude to risk
Ask yourself a simple question: if your investment lost 30% in three months, what would you do?
| Your honest reaction | What probably suits you |
|---|---|
| I sell everything, I can't sleep any more | Savings, classic rental property, bond ETFs and a few stocks |
| I don't touch anything and wait | Global equity ETFs over the long term, real estate |
| I buy more, it's an opportunity | Stocks, entrepreneurship, a small share of crypto |
There is no right answer. There is only a strategy that fits yours.
Quick test: what kind of investor are you?
Four questions, your answers are not saved.
Pillar 3: managing your emotions
Learn to recognise your emotions before they decide for you. A few simple practices:
- The 48-hour rule: no important financial decision on the same day, especially if someone is pressuring you.
- The decision journal: write down why you are buying or selling. Reread it six months later. It is humbling and very instructive.
- Breathing: a few slow breaths before answering an ‘exceptional’ offer are often enough to bring the excitement down.
Pillar 4: your skills
Three skills pay off in almost every strategy:
- Communicating and negotiating: a better price on a property, better loan terms, a better client.
- Reading numbers: an income statement, a rental yield table, an ETF factsheet.
- Resilience: coping with failure, starting again, persevering.
Tools to know yourself better
- The 16Personalities test, inspired by the MBTI: interesting to get you thinking, not to be taken as scientific truth.
- Your personal balance sheet: list what you own (assets) and what you owe (liabilities). This simple exercise says a lot about your habits.
- The investor profile questionnaire your bank must give you before advising you: take it seriously.
Reading list
- The 7 Habits of Highly Effective People, Stephen R. Covey
- Mindset, Carol S. Dweck
- Rich Dad Poor Dad, Robert Kiyosaki: see what to take from it
Where to find these services
- 16PersonalitiesFree personality test inspired by the MBTI
Links provided for information, with no partnership. Always check a provider's terms and authorisation before committing.
Test yourself
3 questions to check what you remember. Click an answer: the explanation appears straight away.
Question 1 of 3According to the article, where do most money losses come from?
Selling out of fear, buying out of envy or believing in a shortcut costs more than most calculation errors.
Question 2 of 3What is the 48-hour rule?
Letting two days pass brings the excitement or pressure down, especially when faced with an ‘exceptional’ offer.
Question 3 of 3The MBTI personality test is…
Its scientific validity is debated; it mainly serves to get you thinking about how you work.
Frequently asked questions
Why does personal development help with investing?
Because most losses come from emotional decisions: selling out of fear, buying out of envy, believing in a shortcut. Knowing yourself better helps you choose a strategy you will stick to over time.
Is the MBTI test reliable?
It is a good starting point for thinking about how you work, but its scientific validity is debated. Use it as a conversation with yourself, not as a diagnosis.
How do I find out my risk tolerance?
Picture a 30% loss on your investments in concrete terms and write down your honest reaction. Your bank's investor profile questionnaire is also a good tool.
Sources
This article is educational and is not personal investment, tax or legal advice. Figures change: check them with the sources cited or a licensed professional before deciding. Read the full disclaimer.