Positive psychology insights for a wise and confident investing philosophy

Blending insights from Morgan Housel, Positive Psychology, and Coaching Psychology

Here we are in April 2025, global financial markets are experiencing significant turbulence. The recent imposition of sweeping tariffs by the U.S. administration has led to sharp declines in stock markets worldwide, with the S&P 500 entering bear market territory and the Nasdaq Composite plummeting by over 10% in just two days. Economists are raising concerns about a potential global recession, citing increased market volatility and heightened economic uncertainty.

This is what we call a VUCA world—volatile, uncertain, complex, and ambiguous—and financial decision-making can feel overwhelming. But while we cannot control the economy or markets, we can cultivate the mindset, emotional agility, and self-awareness that enable wise financial choices.

Drawing from insights in Morgan Housel’s The Psychology of Money, as well as principles from positive psychology and coaching science, I’ve identified six key principles to help you develop a wise and confident investing philosophy. These offer a holistic approach to navigating uncertainty and shaping a flourishing relationship with money.

1. Practise Humility When Things Go Well, and Compassion When They Don’t

Housel reminds us that outcomes in finance are often shaped by luck and risk—factors largely outside our control. Recognising this encourages humility in success and self-compassion in setback. This mirrors the positive psychology concept of self-compassion (Neff, 2003), which research links to lower financial stress and improved coping behaviours.

In coaching, we often see clients internalise outcomes as reflections of self-worth. Using the CTFAR model, we might help a client shift their thought from “I failed at investing” to “This investment didn’t go as planned, and I can learn from it.” This shift alters the emotional response from shame to curiosity—enabling growth.

Practice: After a financial setback, journal three things you handled well and one lesson learned. Reframe the outcome using CTFAR to shift from self-blame to self-efficacy.

2. Manage Your Money in a Way That Helps You Sleep at Night

“Does this decision support your well-being?” That question is central to both investing and psychological flourishing. Housel’s idea of a “sleep-at-night” portfolio aligns closely with subjective well-being theory and the concept of authenticity in decision-making. It’s not about maximising returns, but about aligning your financial choices with your emotional safety and personal values.

In coaching, this means helping clients define success on their own terms. What feels safe and sustainable for one person may feel restrictive or reckless for another.

Practice: Write your own Money Sleep Test. On a scale from 1 to 10, how peaceful do you feel about your current financial plan? What would move you closer to 10?

3. Stretch Your Time Horizon—It’s the Ultimate Advantage

Positive psychology highlights the power of future focus and optimism. Research shows that those who maintain a long-term view (Seligman, 2006) tend to make better decisions, experience less stress, and recover more quickly from setbacks. Housel’s call to embrace long time horizons is thus both financially and psychologically sound.

In coaching, we support this using visualisation tools like “Best Possible Self” exercises. These strengthen hope and agency, core elements of psychological capital.

Practice: Write a letter from your future self 10 years from now. Describe what your financial life looks like, what values have guided you, and how you feel. Use this to inform decisions made today.

4. Become Comfortable With Being Wrong (Often)

This principle supports a growth mindset (Dweck, 2006), encouraging tolerance for failure and the understanding that errors are part of learning. Positive psychology teaches us that resilience is not the absence of failure but the capacity to recover and learn.

In coaching, this insight is essential. Clients often judge their performance by single outcomes—one failed investment, one missed opportunity. We use models like CTFAR to decouple results from identity. “A bad outcome” does not mean “I am bad with money.”

Practice: Audit your portfolio of financial decisions. Highlight those that didn’t go as planned—and write one sentence of self-validation and one insight for each.

5. Worship Room for Error—It’s What Keeps You in the Game

Room for error is not about pessimism—it’s about realistic optimism. In positive psychology, this is defined as the ability to expect good things while accounting for reality (Schneider, 2001). Planning for margin allows you to remain emotionally regulated under pressure—key for self-determination and resilience.

In coaching, this might look like challenging “all-or-nothing” thinking. Clients often assume that they must act perfectly or not at all. Encouraging strategic buffer zones—whether financial or emotional—fosters endurance.

Practice: What’s your “margin for error” today? Financially, emotionally, practically? Where could you build just 5% more space or flexibility?

6. Define Your Own Game—Don’t Play Someone Else’s

Comparison is a psychological trap. According to self-determination theory (Deci & Ryan, 2000), true motivation and well-being arise when actions are autonomous and aligned with one’s own values—not externally driven. Housel’s reminder to define your own game is therefore profoundly psychological.

In coaching, we support clients in clarifying their financial purpose, values, and unique constraints. The goal is to silence the noise of other people’s rules—and build a personal money philosophy.

Practice: Finish this sentence: “For me, financial success looks like…” Then ask: “Whose definition am I following—and is it really mine?”

Closing Reflection

Navigating money wisely is not about being perfect. It’s about being intentional, emotionally aware, and grounded in a resilient philosophy. These six principles—anchored in both behavioural finance and positive psychology—can help you flourish financially and psychologically.

Because in the end, your financial well-being isn’t just about how much you have.
It’s about how aligned, autonomous, and empowered you feel in having & managing it.

Sincerely Yours,

Dr. Sophie

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Inspired by:

Deci, E. L., & Ryan, R. M. (2000). The “what” and “why” of goal pursuits: Human needs and the self-determination of behavior. Psychological Inquiry, 11(4), 227–268. https://doi.org/10.1207/S15327965PLI1104_01

Dweck, C. S. (2006). Mindset: The new psychology of success. Random House.

Housel, M. (2020). The psychology of money: Timeless lessons on wealth, greed, and happiness. Harriman House.

Neff, K. D. (2003). Self-compassion: An alternative conceptualization of a healthy attitude toward oneself. Self and Identity, 2(2), 85–101. https://doi.org/10.1080/15298860309032

Schneider, S. L. (2001). In search of realistic optimism: Meaning, knowledge, and warm fuzziness. American Psychologist, 56(3), 250–263. https://doi.org/10.1037/0003-066X.56.3.250

Seligman, M. E. P. (2006). Learned optimism: How to change your mind and your life. Vintage.