The following models don’t come with in-depth classes or mastery manuals. However, the topic of investing is a core one and I believe it’s important to include overviews and resources for the most important models in this area.


I believe that investing is one of the best places to build up a base of mental models. The reason is that we are all investors of our time. And more recently, with Web3’s structure, how we spend that time is also a financial investment decision.


Although crypto markets are going up overall, most people who enter it actually lose money or stay the same.

Top Mental Models For Smart Investors

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How To

Develop a plan

  • Address all contingencies
  • Ask yourself these questions
    • What markets will be traded?
    • What is the capitalization?
    • How will orders be entered?
    • What type of drawdown will cause trading cessation and reevaluation?
    • What are the profit goals?
    • What procedure will be used for analyzing trades?
    • How will trading procedures change if personal problems arise? How will the working environment be set up?
    • What rewards will the trader take for successful trading?
    • What will the trader do to continue to improve market skills?

Follow a trading style that matches your own

  • Goals
  • Desires
  • Attraction

Keep a trading journal

  • Categorize the trades
  • How you did it
  • Why you did
  • Emotions you were feeling
  • Review the journal periodically

Set price targets

Follow the plan without exception

Establish a hurdle rate new investments must hit

Fundamental Rules

Don’t believe that “This time is different”

You can’t make money predicting the future

Don’t trade when you can’t afford to lose

  • When you can’t afford to lose something, you become much more emotional and fear-driven. As a result, you become more irrational. For example, here some examples from Jack Schwager:
    • “You will miss out on some of the best trading opportunities because these are often the most risky.”
    • “You will jump out of perfectly good positions prematurely on the first sign of adverse price movement only to then see the market go in the anticipated direction.”
    • “You will be too quick to take the first bit of profit because of concern that the market will take it away from you.”
    • “Staying with losing trades as fear triggers indecisiveness, much like a deer frozen in the glare of a car’s headlights.”

Emotional Regulation

“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger

Don’t sell low

Most traders cannot stand the thought of selling near a recent low, especially soon after a sharp break. Consequently, with everyone waiting to sell the first rally, the market never rallies.

Patience for hurdle rate

Patience was an element that a number of the supertraders stressed as being critical to success. James Rogers said it perhaps most colorfully, “I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.” —Jack Schwager in New Market Wizards

Be careful of taking advice on trades

  • Listening to other opinions on trades is risky. If you get in on an opinion, you’ll have no basis for deciding when to get out of the trade.

You can’t time the market

  • Markets keep going higher than you’d think and go down much faster.
  • If you miss just a few days of huge gains, you lose almost all of your returns.

Cascade effect

  • One trading sin led to a cascade of others.


You don’t always have to be in the market. Don’t trade if you don’t feel like it or if trading just doesn’t feel right for whatever reason. To win at the markets you need confidence as well as the desire to trade. I believe the exceptional traders have these two traits most of the time; for the rest of us, they may come together only on an occasional basis. —Jack Schwager in New Market Wizards