The Behavior Gap Book Review and Giveaway
“I coined the term “behavior gap” to label the gap between investor returns and investment returns, and I started drawing the sketch you see here on every whiteboard I could find.” – Carl Richards, author, The Behavior Gap
Carl Richards is a certified financial planner, founder of Prasada Capital Management, a portfolio design firm and an acclaimed author about behavioural finance. Richards believes investments don’t make mistakes, investors do. Investment success is not so much about skill as it is about behaviour and the extent you can control your behaviour when investing or staying invested for the long-term. These concepts are not really revolutionary but they are extremely well-described in Carl’s book, The Behavior Gap. Here are some of my favourite parts from this book.
On “picking your poison”:
“We often treat fear and greed – the primary drivers of most big behavioral mistakes investors make – as flip sides of the same coin. But they’re really two very different emotions. It’s important to figure out which emotion is the bigger issue for you.”
On what comes first:
“Find investments to populate your plan. This comes at the end of the planning process. You would never spend time researching and debating whether to travel by plane, train or car until you figured out where you were going.”
On taking advice from others, professional or otherwise and market forecasts:
“Advice and forecasts are often distractions from our real task: getting to know ourselves and our goals, making choices aligned with those goals, and adapting to the surprises that are bound to come along.”
On market information and the noise it creates:
“Something crazy is always happening on the other side of the world, but what does that have to do with you? You can’t do anything about it. You – and the world – are better off if you focus on what you can do.” “Focus on your personal economy and stop worrying about the global one.”
Richards has many more straight-talk financial gems in his book so to get your FREE copy of The Behavior Gap all you need to do is to enter the giveaway below. I’ll draw one lucky reader at random in a few weeks and send the book to you for summer patio reading. Thanks for entering the draw and good luck!
I just emailed the winner. If they don’t get back to me, I’ll be drawing another name.
Keep reading the site, more giveaways to come.
@My Own Advisor
It’s an interesting idea but it maybe hard for most people to follow especially if they are just starting out. For myself an inheritance helped immensely (enough to kick start my retirement savings but not enough to retire on) as it gave me a lump sum to work with. But to answer the question so far so good. It’s helped identify some stocks that normally as a DRIP investor I might pass on. Such as Sunlife or IAMGOLD, both up substantially since being bought.
First year was just figuring it out, so this year will be my first proper year, so I’ll keep you updated
Good call on Sunlife. That and MFC have been a big run this year. That kinda sucks, I like my stock prices low.
@john this is the same issue I’m struggling with, do I rebalance by selling the winners or do I use fresh capital. I did sell and take some profits this year but only because it was my first year doing BTSX and needed to make some adjustments.
Thanks for the comment Rob. I never sell my winners, I let them run more. BTSX is an interesting strategy. Is it working for you?
As dividends have risen over the past few years, we find ourselves enjoying the high yields (over 6% in many cases) and are reluctant, especially while sitting on cash, to rebalance. We use purchase opportunities to rebalance the down sectors but selling the winners is very hard to consider especially since we have no pensions and are going to be depending on the dividend streams for retirement income.
Would love to read the book
Tendency to want to sell when stocks and bonds are falling, and buy the latest fads and top performers (performance chasing)!!!@My Own Advisor@My Own Advisor
Tendency to want to sell when stocks and bonds are falling, and buy the latest fads and top performers (performance chasing)!!!@My Own Advisor
Thank you for this opportunity, Mark. I would love to sit on my patio reading ‘The Behaviour Gap’ book.
I look forward to all of your posts and read all of your weekend reading links.
Perhaps the most important concept in managing one’s personal finances!
Absolutely Be’en. What behavioural and/ emotional issues do you struggle with when it comes to investing?
Thanks for the giveaway! I am definitely interested in the book. I haven’t heard of it before now.
This book would be a very nice addition to our family financial collection. It would be real nice to get it. Thanks Mark
The problem is know when it’s greed and when it’s greed and when it’s fear. Really the only way of doing this is with a mechanical trading system, such as rebalancing once a year. Problem most people don’t like that as it removes control.
Enjoy Carl’s site and would love to read his investment views!
This book would probably help me from making some more mistakes in my investment decisions. Thanks for running these contests.
Love this. Buy fear sell greed. Unfortunately too many of us throw this out the windows when it comes down to actually acting on our advice.
As a relatively young (26) investor looking to really make my money work for me, I would love the opportunity to have this book as a resource! Thanks for the chance to win a copy, and I guess even if I don’t get it, buying it would seem like a good investment anyways.
The behaviour gap is something few investors realize when filling out their retirement calculators or looking at expected return. I try to stay conscious of it when all the talking heads are going off about which way the market will go, or what the next hot investment will be, and just stay true to my strategy.
Would love to read the book!
Great idea Mark. One of my favorite books on giving people the correct perspective for their finances and investments. Carl offers timeless advice. I’ve reviewed it in the past as well.