Many people who invest wonder why they’re not getting some of the investment returns that others are getting, even if it seems like they are doing the exact same thing.
One of my favorite presentations that tackled this topic was between Carl Richards, author of The Behavior Gap, talking with Betterment founder Jon Stein. They went over bad investing behaviors and how to fix them.
- Evaluate & Set Goals: Carl emphasizes getting a snapshot of your current reality. Once you know where you’re currently are financially he then says create specific goals about where you want to be . He points out setting goals around what you want to do with your money, reflecting your unique values.
- Be Realistic: You’re Not Going to Beat the Market: You have to determine how to invest the money. We tend to take past and use it to predict the future, especially with stocks.
- Avoid the Gap: Investment returns vs investor returns – Carl show how we actually invest is so different from the reported returns. Many times human nature has people buying and selling at the wrong times. Don’t find the best investment, become a better investor.
- Automate: Automation helps us overcome our tendency to tinker with our investments when we shouldn’t. It’s not exciting, but it works.
- Keep It Simple: Think of creating a financial system as a set of guardrails to protect yourself from hurting your own finances. If it’s a complicated system you won’t be able to keep up with it.
I think Jon had some great points to add with Carl’s tips. He shared his own story about investing in the wrong stock and how it made him realize that investing in the market rather than just stocks was the ticket.