DR 022: Interview with Carl Richards, Author of The Behavior Gap

Share:

This is the fifteenth day in our 31-Day Money Challenge. Over 31 days we’ll publish 31 podcasts, each designed to help you move closer to financial freedom. Yesterday we looked at juggling competing financial goals, like getting out of debt and saving for retirement. In today’s podcast, we turn to investing with an interview of Carl Richards, author of The Behavior Gap.

Sponsors: The 31-Day Money Podcast is sponsored by Betterment and Personal Capital. Betterment and Personal Capital are two tools I use to make investing easier, less expensive, and more effective.

Topics Covered

  • Why Carl starting drawing sketches to explain complex financial concepts.
  • Why investors earn less than their investments actually return.
  • Why the average holding period of a mutual fund is under 3 years.
  • What is the Behavior Gap?
  • Why investors tend to buy high and sell low?
  • The importance of an asset allocation plan to avoid the Behavior Gap.
  • How Carl helps clients determine how much to invest in stocks and bonds.
  • Rules of thumb to decide on a stock and bond allocation.
  • The critical role of expenses in retirement investing.

Resources

Day 16: Invest Like a Business Owner

Published or Updated: July 29, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Kenneth says:

    Listened to podcast 22 this morning. Thank you. Whether dieting, or financial dieting, fighting your own behavior is always the number one obstacle. The best way to attack the issue is to form a new habit pattern through daily, weekly and monthly repetition.

    Regarding your questioning an 80% stock allocation for a young person, you’re probably dead wrong here. It should be 100% (VTSAX Vanguard Total Stock Market would be the best single choice here. but even SPY S&P 500 index fund would be good). The thing is, they are dollar cost averaging by saving some of their earnings every paycheck. They can expect several market meltdowns during their accumulation years. These are GREAT for young people, stocks are on sale for several years during these periods. Eventually the markets recover, they always have.

    The single best set of writing I have ever read about investing is by JLCOLLINSNH and he has titled id the Stock Series, link is http://jlcollinsnh.com/stock-series/

    Jim Collins is also a friend of Mr. Money Mustache.

    • Rob Berger says:

      Kenneth, thanks for the comment and resource. On stock allocation, I find it hard to agree that there is ONE right decision. In my view, a 100% stock allocation is not a good idea for those who cannot handle the market declines. If they can, then such an allocation seems perfectly fine to me.

      One more thing to add–this comes from JLCONNINSNH: “A portfolio of 100% stocks, which is what VTSAX gives you, in study after study provides the greatest return over time. The only downside, and I mean only, is that the ride will be very rough at times. Admittedly, it’s a big one. If you are not tough enough to stay the course, if you get scared and bail when the storms are raging you are going to drown. But that’s a failure in you, not a downside of this asset class.

      As an aside, there are a few studies that indicate that a 80%/20%, stock/bond mix will actually outperform, very slightly, 100% stocks. It is also slightly less volatile. If you want to go that route and take on the slightly more complicated process, you’ll get no argument from me.”

Speak Your Mind

*