Speaker 1: Welcome to How to Money. I'm Joel and I'm Matt
Speaker 1: and today we're talking about behavioral finance with Daniel Crosby. Cheduel.
Speaker 1: Today we are excited to be sitting down with Dr
Speaker 1: Daniel Crosby. He is a psychologist and a behavioral finance
Speaker 1: expert who helps folks understand the intersection of their minds
Speaker 1: and the market. Daniel is a New York Times bestselling
Speaker 1: author on behavioral finance, and his latest book, The Behavioral
Speaker 1: Investor looks at the psychology, physiology, and sociology of financial
Speaker 1: decision making. That's a lot of bologies, a lot of oologies.
Speaker 1: He sets forth practical tips as well for making improvements
Speaker 1: and so when he's not consulting around market psychology, Daniel
Speaker 1: enjoys exploring the American South, fanatically following St. Louis Cardinals baseball,
Speaker 1: and spending time with his wife and three children. So, Daniel,
Speaker 1: thanks for being here, man, Yeah, my pleasure, Thanks for
Speaker 1: having me. He mentioned the Cards didn't they wamp the
Speaker 1: Braves a few days ago? Did you watch that game? Well?
Speaker 1: I was at all of the games, but then the
Speaker 1: Braves wamped the Cardinals the second too. But there was
Speaker 1: a streaker at the second one, so it was still
Speaker 1: worth it. Yeah, that was crazy. He was a non
Speaker 1: nude streaker who made it all the way from left
Speaker 1: field to home plate and then got crushed. I want
Speaker 1: the Braves security. I love the video of that security.
Speaker 1: People always just hammer them. He crushed him over a
Speaker 1: half brick while it was incredible. This is my moment. Yeah. Well,
Speaker 1: and he slipped. He broke his knees like this guy
Speaker 1: he was coming at him. He juked him, he slipped,
Speaker 1: then he got back up and laid the tackle on him.
Speaker 1: So go go Braves security guard. Wow, that's awesome. I
Speaker 1: think that that might be the most you hear us
Speaker 1: talking about baseball. We tend to talk about soccer here
Speaker 1: on the podcast. We're unintentional hipsters, I think, but we're
Speaker 1: trying not to be great soccer city. Yeah. By the way, Daniel,
Speaker 1: thanks so much for bringing beer. Daniel brought Land of
Speaker 1: brewing companies hop Planta for us to have on the
Speaker 1: show today. So yeah, we really appreciate you bring tasting
Speaker 1: notes on that one at the end of the show.
Speaker 1: So the first question we ask anybody that comes on
Speaker 1: the podcast now, Tamiel is since we do drink a
Speaker 1: beer on every show. It's something that we splourge on.
Speaker 1: What it's like the craft beer equivalent in your life.
Speaker 1: So it's it's cheese. So so my wife and I
Speaker 1: we we average seven different types of cheese and said
Speaker 1: at any given time, so we are love cheese. We
Speaker 1: uh we. Price is no object. We just buy what
Speaker 1: we want and it's absolutely a blast to to write
Speaker 1: different types of cheese for us. So that's our thing,
Speaker 1: it's your splurge. It's also a consumable. What is it
Speaker 1: about things that we consume that I don't know? We
Speaker 1: we derive a lot of pleasure from the senses, right,
Speaker 1: like cheese, I assume what kind of cheese? A do
Speaker 1: you like? We we like double cheese. No, I don't
Speaker 1: love this stinky stuff. Our favorite sort of easy go
Speaker 1: to is the doubling our cheese. We we tried it
Speaker 1: in Dublin for the first time and it's like got
Speaker 1: good family memories from a family trip I took there.
Speaker 1: So yeah, yeah, yeah, not nothing too stinky though. We're
Speaker 1: that's cool all right. Well we want to ask you too,
Speaker 1: like why did you decide to get into thinking about money?
Speaker 1: And you received your doctorate in psychology, but you've turned
Speaker 1: your focus to kind of investing in and behavioral finances.
Speaker 1: So like what spurred that on in you? Yeah? So
Speaker 1: um not wanting to be broke because the easy answers,
Speaker 1: so the UM. I had two great loves early on
Speaker 1: in college. One was investment management. I'm the son of
Speaker 1: a financial advisor, so just grew up in a house
Speaker 1: where we were always talking about investing in stocks at
Speaker 1: the dinner table. Uh. So grew up with a real
Speaker 1: love and a and a real familiarity with with that
Speaker 1: whole world. But it was also fascinated by human behavior.
Speaker 1: And so I went through my doctoral program, got about
Speaker 1: halfway through and had just had enough of being a clinician.
Speaker 1: You know, I'd met with thousands of clients and I
Speaker 1: was frankly just stressed out by it, you know, the
Speaker 1: rigors and just the tough slog of seeing forty fifty
Speaker 1: people a week who were having a very bad week. Uh.
Speaker 1: We just beginning to take its toll on me. And
Speaker 1: so I said, look, I love thinking about human behavior.
Speaker 1: I love wondering about why people do what they do,
Speaker 1: But is there a non medical application of this? And
Speaker 1: so my dad, being who he was I stumbled upon
Speaker 1: behavioral economics behavioral finance pretty early on. Uh, and it's
Speaker 1: been a great ride since. Were you board by the
Speaker 1: financial discussions at the dinner table when you're as a kid? No,
Speaker 1: I actually loved it. And it was one of those
Speaker 1: things where, you know, in my in my fifth grade
Speaker 1: um stock market game simulation, I dominated, right, And so
Speaker 1: you know, having having my dad helped me out. And
Speaker 1: I remember investing in the Chicago Tribune and these different stocks,
Speaker 1: Harley and these different stocks early on and watching it
Speaker 1: go up and just thinking how amazing it was that
Speaker 1: I could make money off of other people's work. I
Speaker 1: mean that was like as a as a young lazy kid,
Speaker 1: I was like, wow, Like other people are working and
Speaker 1: I'm getting paid and I'm clipping coupons getting dividends. It
Speaker 1: was just transformative to me. So I actually quite loved it.
Speaker 1: So let's talk a little bit about your book, The
Speaker 1: Behavioral Investor. In that book, like in the first portion
Speaker 1: of it, you spent a lot of time talking about
Speaker 1: our bodies and our minds and society as well. Why
Speaker 1: do you find that that's so important to to focus
Speaker 1: on in particular when it comes to investing in making
Speaker 1: those decisions. Yeah, so I I tried to take a
Speaker 1: big step back with this book because you know, most people,
Speaker 1: maybe they give some thought to psychology, but they give
Speaker 1: very very little thought to context. And so one of
Speaker 1: the things that that I have learned in my study
Speaker 1: of why we make the decisions that we do is
Speaker 1: that willpower is very limited and that context matters a
Speaker 1: great deal. You started off with with talking about the
Speaker 1: beer that I brought. So I'll give an example from
Speaker 1: a liquor store that was trying to titrate the the
Speaker 1: inflows and outflows of the different types of liquor. They
Speaker 1: found that the type of music they played was the
Speaker 1: best predictor of what people would buy. So they're trying
Speaker 1: to manage how much wine or champagne or beer they have.
Speaker 1: In days that they played German music, that the consumption
Speaker 1: of beer went up over On days when they played
Speaker 1: French music, the consumption of champagne went up over seventy percent.
Speaker 1: But if you ask someone leaving the store, like why
Speaker 1: did you buy this beer, They're not going to say,
Speaker 1: you know, I was subtly influenced by environmental cues. So
Speaker 1: we go through our days and we make all these
Speaker 1: choices sort of beneath our awareness, and so I wanted
Speaker 1: to highlight, you know, societally, physiologically, here are some of
Speaker 1: the things that are impinging on your ability to make
Speaker 1: good financial choices, because I thought there was sort of
Speaker 1: a gap in the literature around that. So, yeah, that's
Speaker 1: a great example. I think that actually helps us see
Speaker 1: how our brains are susceptible to having things that aren't
Speaker 1: necessarily self generated to make a decision um. And so
Speaker 1: when it comes to our brains, why is it that
Speaker 1: our brains play tricks on us? And why does that
Speaker 1: make it hard for us to be actually savvy, decent investors.
Speaker 1: So one of my favorite stats that I that I
Speaker 1: came across in the book was that your brain accounts
Speaker 1: for about two to three percent of your body weight,
Speaker 1: but it accounts for of your metabolic expenditures in a
Speaker 1: given day. So of the calories that you burn in
Speaker 1: a day are down to thinking effectively. And so because
Speaker 1: there's this enormous mismatch, your body is always trying to
Speaker 1: go into energy saver mode and be more efficient. And
Speaker 1: of the ways that we do this basically by shutting
Speaker 1: the brain down, like trying to think less. So we
Speaker 1: do things like we look at our neighbors and see
Speaker 1: what they're doing, and we try and do that, or
Speaker 1: we turn on the TV and see what the financial
Speaker 1: talking heads are telling us we should do. We draft
Speaker 1: off of the opinions of others, or we do what
Speaker 1: we've always done, or we do what our parents do.
Speaker 1: We're just not equipped to really make well thought out,
Speaker 1: well reasoned financial decisions again and again and again, because
Speaker 1: there's this huge mismatch between how hungry our brain is
Speaker 1: and how big it is. And so that to me
Speaker 1: is is an incredible Uh, was an incredible thing to learn.
Speaker 1: You know. The other thing I learned is that we
Speaker 1: lose thirteen percent of our intelligence of our i Q
Speaker 1: when we're under financial stress. So even if your brains
Speaker 1: fully loaded, right, even if your brain is is locked
Speaker 1: and ready to go with all the right financial education
Speaker 1: that you need, when when the risk hits the fan,
Speaker 1: so to speak, you're dumb, Like you you have least
Speaker 1: access to these things when you need them most. So
Speaker 1: your brain is not not too well equipped to be
Speaker 1: a savvy financial decision maker. Yeah, even though you know
Speaker 1: those facts, you know what you should be doing when Yeah,
Speaker 1: like when when the stuff hits the fan. Yeah, you
Speaker 1: are incapable of making the proper decision. One of the
Speaker 1: other things you mentioned in your book as well was
Speaker 1: how we're wired for more that immediate gratification and how
Speaker 1: we have a really tough time thinking beyond that, and
Speaker 1: that again makes us terrible long term investors, right, yeah,
Speaker 1: it does. There was a fascinating study in Merrill Lynch
Speaker 1: actually bought this technology. There was technology that allowed you
Speaker 1: to age your face so like you could take picture
Speaker 1: of you and then it would make you look like
Speaker 1: you were, you know whatever, a hundred years old. Joe
Speaker 1: loves that app co my co worker literally the other day,
Speaker 1: took a picture of me. Was like he was like,
Speaker 1: stand still, I'm gonna take a picture of you and
Speaker 1: I had no idea what he's doing for and he
Speaker 1: turned me into a girl. Yeah so yeah, yeah, you
Speaker 1: still get carded, don't you pretty much? Yeah. So what
Speaker 1: they found though, is when people were able to envision
Speaker 1: themselves older, they dramatically up their retirement savings. Because most
Speaker 1: of us think, you know, we're going to be this
Speaker 1: age forever and the me that exists today is the
Speaker 1: me that will always be. But we have to really
Speaker 1: get a more visceral sense of a of a future
Speaker 1: self that's gonna want vacations and food and you know,
Speaker 1: a warm place to sleep just as much as today
Speaker 1: you does. And that's hard for us to get our
Speaker 1: minds around, right, And so anything that we can do
Speaker 1: to kind of get a better picture of that future
Speaker 1: self is powerful, But it's nothing we do very naturally. Yeah,
Speaker 1: I think, Yeah, most people in their twenties, and looking
Speaker 1: back to when I was in my early twenties, it's
Speaker 1: kind of abnormal interested in this stuff. But most people
Speaker 1: it's just you think you're invincible, you think you're gonna
Speaker 1: live forever when you're twenty two, and that's just not
Speaker 1: the case. And but that's the most important time to
Speaker 1: start getting invested too, in the stock market, to start
Speaker 1: thinking about the future. But that's often the time that
Speaker 1: people are least thinking about the future. Yeah, the world
Speaker 1: of investing is full of these paradoxes, right, Like, twenty
Speaker 1: two is exactly when you need to be started building
Speaker 1: a compounding life financial legacy. And at that point, your
Speaker 1: prefrontal cortex isn't even fully formed, and you don't even
Speaker 1: fully grasp a relationship between cause and effect, and I
Speaker 1: think if we all look back to college, we can
Speaker 1: we can bring to mind instances where where this was
Speaker 1: on full display. But yeah, you're you're well positioned to
Speaker 1: start saving, but not psychologically. So, Daniel, you talked some
Speaker 1: in the book as well about the primacy and the
Speaker 1: recency effect. Can you explain that a little bit when
Speaker 1: it comes to investing. You know, we're talking about age
Speaker 1: and how certain things affect how we view money and
Speaker 1: just things in general. How does it affect how we
Speaker 1: view investing? Yes, So the primus see in recency effect,
Speaker 1: is this notion in psychology that's backed up by the
Speaker 1: literature that we have the best memory for things that
Speaker 1: happened early on and things that have happened recently. And
Speaker 1: so this is true of even conversations. You go have
Speaker 1: a conversation with a friend, you're going to have the
Speaker 1: best memory for sort of the opening gambit and then
Speaker 1: the last thing that you said before parting. It's also
Speaker 1: true of our investing live so you know, we look
Speaker 1: at someone like I'll use myself as an example. So
Speaker 1: you know, I went to a lot of school, so
Speaker 1: I didn't really get my first job until I was
Speaker 1: about twenty seven, and so I get out, get my
Speaker 1: first job. When I'm twenty seven, I start saving. I
Speaker 1: got a four oh one K, and then within a
Speaker 1: year and a half it's the Great Financial Crisis. So
Speaker 1: you know, you're just getting started. You think you're doing
Speaker 1: the right thing, and this nice little nest that you've
Speaker 1: built up is crushed right, it's down, and then you know,
Speaker 1: bring it to today and we'll go back to Q
Speaker 1: four of eighteen again, we're down fifteen or so. Someone
Speaker 1: like me, if they're not careful and if they don't
Speaker 1: sort of automate good practices, could say, look, the first
Speaker 1: thing that ever happened to my money was it got
Speaker 1: you know, when went down a third. Uh. Recently we've
Speaker 1: had more volatility. Therefore the market is a scary dangerous
Speaker 1: place forgetting that. You know, there's also been a whatever
Speaker 1: a four increase in that time as well. So we
Speaker 1: have to be careful because memory plays tricks on us,
Speaker 1: and especially I think millennials and others who who have
Speaker 1: started saving at an inopportune time or a time when
Speaker 1: they had a traumatic first experiences can be in a
Speaker 1: little trouble. And you know, the interestingly, the inverse is
Speaker 1: true too. You see some people who come out and
Speaker 1: confuse a bull market with a big brain. So they
Speaker 1: got out in a year. You know, Let's say they
Speaker 1: started saving in in two thousand and ten, and they're like, wow,
Speaker 1: this is easy, Like all the stock market does is
Speaker 1: go up. I'm a genius. And so either success or
Speaker 1: a failure can actually be problematic, and we have to
Speaker 1: be careful not to let those early and those recent
Speaker 1: experiences loom too large. Do you think that that same
Speaker 1: principle can affect the way that we broadly view money,
Speaker 1: not just investing. For instance, you sitting around the dining
Speaker 1: room table with your dad, who's you know, talking to
Speaker 1: you about stocks? Or for me, you know, I had
Speaker 1: an experience where my family didn't handle money well and
Speaker 1: we went through bankruptcy when I was thirteen, And that
Speaker 1: to me is like the line of demarcation of why
Speaker 1: I got interested in finances to begin with. How do
Speaker 1: those effects of primacy and recency affect us in regards
Speaker 1: to how we think about money in general? Yes, so
Speaker 1: this is I mean, this is a fascinating question to me.
Speaker 1: It's certainly the lessons that we learned early take take
Speaker 1: deep hold. But what's fascinating to me is anecdotally, what
Speaker 1: I've observed is sort of both sides of this. There
Speaker 1: are people who grew up in in my situation, say,
Speaker 1: where you know this talk about money is ever present,
Speaker 1: and they go, yuck, you know this is too that
Speaker 1: was too much. You know, that was too much. I
Speaker 1: don't I don't care about money. And there's people grow
Speaker 1: up in your situation where there's a bankruptcy or something,
Speaker 1: and sometimes that's going to lead them to say, I
Speaker 1: will never let this happen to me. I'm going to
Speaker 1: educate myself. I'm going to be different, this will never
Speaker 1: happen to me. And then other times, quite naturally, they
Speaker 1: perhaps learned the bad lessons that they grew up with.
Speaker 1: So I wish I knew better what separated people who
Speaker 1: who run from one style versus those who adopt it.
Speaker 1: But I have seen in both cases there's always an impact.
Speaker 1: There's always an impact, but some people run toward it
Speaker 1: and some people run far away from it. But but
Speaker 1: either way, I think you're absolutely impacted by those early experiences. Yeah, Daniel,
Speaker 1: if only we knew the depths of our minds and
Speaker 1: then why it was that we behave that way, right,
Speaker 1: So after the break, we're gonna talk more specifically about
Speaker 1: investing for folks who are not investing at all, things
Speaker 1: to watch out for, but as well, if you are
Speaker 1: already investing, we're going to talk about that as well. Alright,
Speaker 1: we're back from the break. We're speaking with Daniel Crosby,
Speaker 1: behavioral finance expert. Daniel, I so thoroughly enjoyed your book.
Speaker 1: I think I geeked out on somebody the studies and
Speaker 1: the specific stories that you discussed in there. By the way,
Speaker 1: for our listeners, we're going to give away a few
Speaker 1: copies of his book at the end of the episodes,
Speaker 1: so stay tuned for that. But first I want to
Speaker 1: ask you about a story that you mentioned in your
Speaker 1: TED talk and then also mentioned in your book, and
Speaker 1: it was about a woman named Brooke. You were helping
Speaker 1: her with a specific situation and she seemed to just
Speaker 1: bury her in the sand about something that was happening
Speaker 1: in regards to college emissions. Can you tell us a
Speaker 1: story and then kind of how the how we can
Speaker 1: learn from that. Yeah, So, Brooke and not not her
Speaker 1: real name, Brooke was my first ever counseling client, and
Speaker 1: so to set the stage a little bit. I'm twenty
Speaker 1: three years old at the time, which I think we
Speaker 1: can all agree is a great time to be dispensing,
Speaker 1: you know, life advice to people. Yeah, I've got it
Speaker 1: figured out. Come and get refer back to the prefuncile cortex.
Speaker 1: My prefuncial cortex is still half baked at this point.
Speaker 1: So Brooke foolishly comes to you know, comes to see me.
Speaker 1: She's literally the first client I've ever seen. And she
Speaker 1: comes in and she doesn't say a word. She hands
Speaker 1: me six envelopes, like six six large envelopes, and I'm like,
Speaker 1: oh my god, like what, you know, what am I
Speaker 1: in for? This was not in the book? You know,
Speaker 1: this was what? What chapter was this? Because it's all
Speaker 1: book learning at this point. And you know, she explains
Speaker 1: to me that ever since she was a little girl,
Speaker 1: she's wanted to be a doctor, and she's applied to
Speaker 1: six medical schools. She's heard back from all all six
Speaker 1: of them, and she can't bring herself to open the
Speaker 1: envelopes because she she feels like if she finds out
Speaker 1: that she didn't get in, she'll be crushed. So, you know,
Speaker 1: having recently been through the grad school application process myself.
Speaker 1: If I say to her, like, look, don't you have
Speaker 1: to let them know that you're that you're coming, Like
Speaker 1: if you if you did get in, and she goes, yeah,
Speaker 1: I've got like a week and a half before before
Speaker 1: i have to you know, have have worked through this
Speaker 1: open these and have moved on. And so she opened
Speaker 1: them and she got into all six schools, which really
Speaker 1: saved my high I mean, that could be a that
Speaker 1: could have been the end of my therapy career if
Speaker 1: she had gotten into none of them. But she got
Speaker 1: into all six schools. But the point that I made
Speaker 1: to her that that led her to open the envelopes
Speaker 1: is that sometimes in our efforts to to manage or
Speaker 1: mitigate risk, we bring about the certainty of the very
Speaker 1: thing we're scared of. And so in her case, you know,
Speaker 1: if she had the things she was scared of was
Speaker 1: not getting into grad school, and her tendency to not
Speaker 1: want to open these envelopes was going to guarantee the
Speaker 1: very thing she was scared of. For investors, there's there's
Speaker 1: an analog here, because the thing that most investors are
Speaker 1: scared of is not reaching their financial goals, like not
Speaker 1: crossing the finish line. But the way that they manage
Speaker 1: that fear is by not investing, by sitting on the sidelines,
Speaker 1: by staying in cash, by being too conservative. And in
Speaker 1: a world where your money is being destroyed by inflation
Speaker 1: at a rate of about three percent a year, choosing
Speaker 1: not to invest is bringing about the certainty of failure.
Speaker 1: You're dooming yourself to a diminished quality of life and
Speaker 1: diminished earning the potential. So that's the analog I'm trying
Speaker 1: to make their It's like, by not taking risk, you're
Speaker 1: actually choosing the most risky possible road. That's right. Not
Speaker 1: risking is the riskiest thing you could ever do. So
Speaker 1: for those folks, I mean, what do you say to them, Like,
Speaker 1: to those folks who aren't investing and they do have
Speaker 1: their head in the sand and they're just trying to
Speaker 1: avoid making that decision altogether, do you just say invest? Well,
Speaker 1: So it's interesting, there's a I've used to be really
Speaker 1: bad at this because I would get frustrated and go, oh,
Speaker 1: come on, like you, why aren't you doing Why aren't
Speaker 1: you doing this? Like you know, and you kind of
Speaker 1: bang your head against that wall. But we as a
Speaker 1: human family have a profound sort of get lost impulse
Speaker 1: when someone commands us to do something, you know, we
Speaker 1: kind of give them the finger, you know, metaphorically when
Speaker 1: they try and tell us to command us to do
Speaker 1: something or tell us we're so dumb for not doing something.
Speaker 1: So what I do now is I listen, you know,
Speaker 1: I listen and say, you know, what are what are
Speaker 1: the fears around this? And I try and empathize with
Speaker 1: those fears, and people once they feel understood, I feel
Speaker 1: like then they're open to having a conversation about the
Speaker 1: nuts and bolts of why investing is a good idea.
Speaker 1: But I find the same thing with diversification because here
Speaker 1: in Atlanta, I run across all sorts of folks who
Speaker 1: have eighty percent of their wealth and Coke or ups
Speaker 1: or a flack or any of the large corporations that
Speaker 1: are around here, and they're scared to diversify away from
Speaker 1: these really concentrated positions. And then when you start to listen, though,
Speaker 1: if you just say, look, you know, it's dumb. All
Speaker 1: of your eggs are in one basket, they they're not
Speaker 1: responsive to that. But if you listen and hear things like, look, um,
Speaker 1: you know this company took a chance on me when
Speaker 1: I had nothing, and they've made me a millionaire. They've
Speaker 1: made me who I am today. You can go, okay,
Speaker 1: you know, you can listen, you can empathize, and you
Speaker 1: can go, well, it's still dumb, but but but they're
Speaker 1: in a place to hear that. I think once they've
Speaker 1: been understood, Yeah, I think. Yeah, dogmatism can be a
Speaker 1: turn off for so Okay, So, how does your investing
Speaker 1: timeline influence how we should think about risk when it
Speaker 1: comes to how we allocate our investments. Yeah, so, I mean,
Speaker 1: you you definitely want to take less risk as you
Speaker 1: approach retirement, and you even within that, you want to
Speaker 1: take less risk with buckets of money that you need
Speaker 1: in the short term. You know, there's plenty of folks
Speaker 1: who are young people who are saving for say a
Speaker 1: down payment on a home or or vehicle or something
Speaker 1: like that. You don't want to put that money at
Speaker 1: risk if you're gonna need it in the next two
Speaker 1: or three years. Because markets have historically returned, you know,
Speaker 1: returned your investment quite nicely over ten or twelve years.
Speaker 1: You've you've never had a nominal loss in the stock
Speaker 1: market over a twelve year period, but over one year
Speaker 1: or two years, anything can happen, So yeah, you definitely
Speaker 1: want to take less risk. But we see people starting
Speaker 1: to change those assumptions now. You know, I have we
Speaker 1: all have young children here, and I remember when my
Speaker 1: my two year old was born, the nurses told us,
Speaker 1: you know, fort pent of the kids that are her
Speaker 1: age will live to be over a hundred. That's shocking,
Speaker 1: that's crazy. You know, it's shocking to think that. Let's
Speaker 1: you know, you go to college until you're twenty two,
Speaker 1: maybe you go to grad school toil your twenty four
Speaker 1: twenty five, you work for forty years, and then you've
Speaker 1: got to live for forty years of what you work for.
Speaker 1: I mean, that's an incredible lift, right, And so historically
Speaker 1: that the idea has been and it remains a good
Speaker 1: idea to take less risk as you age. But we
Speaker 1: find that, you know, people even in retirements still need
Speaker 1: to hold stock because that you're gonna live for thirty
Speaker 1: or forty more years in many cases. Yeah, it goes
Speaker 1: back to that idea that not taking enough risk is
Speaker 1: actually the riskiest thing you can do. Yeah. Yeah, And
Speaker 1: the other thing is too, is with so much information
Speaker 1: at our fingertips, when it comes to research and stocks
Speaker 1: and just all the publications that are out there and
Speaker 1: all the articles. At times there can be such an
Speaker 1: overwhelming flood of information and recommendations as to what we
Speaker 1: should be investing in. How would you recommend to folks
Speaker 1: uh to start approaching that? Like, how do you take
Speaker 1: that first bite? How do you narrow in your focus
Speaker 1: and decide what to actually invest in? So there's there's
Speaker 1: something called the Lynda effect, which shows that the longer
Speaker 1: something's been around, the longer it's likely to be around. Okay,
Speaker 1: So like if we look at today, Um, Kim Kardashian
Speaker 1: has a book of herselfies which is like right at
Speaker 1: the top of the book charts right, and it's been
Speaker 1: there for a year. Um, but I wouldn't bet that
Speaker 1: it will be there in a hundred years. That's just
Speaker 1: my guess. And yet you look at the age to disagree.
Speaker 1: And yet you look at like great philosophical works or
Speaker 1: even you know, books like The Richest Man in Babylon
Speaker 1: or something like this, these sort of classics, it's like
Speaker 1: if they have endured, their likely to endure. And so
Speaker 1: I think that is a sound principle when you're trying
Speaker 1: to understand how to get started with with educating yourself
Speaker 1: about how to invest. There there are a couple of
Speaker 1: really good books that have been around for a really
Speaker 1: long time. They're timeless principles, they're not going anywhere, and
Speaker 1: that is a great place to start. Books over articles,
Speaker 1: long form over short form. I think podcasts like yours
Speaker 1: are another fantastic place to start people who uh don't
Speaker 1: have a reason to steer you wrong because unfortunately, you know,
Speaker 1: so many people are incentivized to to give a brand
Speaker 1: of financial advice that puts money in their pockets, and unfortunately,
Speaker 1: in this country, we we still don't have a system
Speaker 1: where even you know, some financial advisors so called, have
Speaker 1: to act in the best interests of their clients, which
Speaker 1: is sort of an incredible thing to consider. So books
Speaker 1: that have been around a long time are a great
Speaker 1: place to start. And then you know information sources like
Speaker 1: yours that that aren't conflicted and can give you a
Speaker 1: great unbiased starting point. Daniel, can I interest you in
Speaker 1: our life insurance that we're offering. Yes, well, I mean
Speaker 1: hold that note though, do you want to recommend a
Speaker 1: couple books? I mean, you mentioned the richest man in
Speaker 1: Babylon it's a classic. Other a couple other favorites of
Speaker 1: yours that I recommended listeners. I'm going to of course blank.
Speaker 1: So the there's a link called the Nocturn Capital Reading
Speaker 1: List which has some of the best, uh the best
Speaker 1: books that I love that that list of the best books, right,
Speaker 1: So that's a great place to start. I would recommend,
Speaker 1: of course, shamelessly, my book The Laws of Wealth as
Speaker 1: sort of a good to introduction. The Richest Man in
Speaker 1: Babylon Intelligent Investor uh is a is a classic. That's
Speaker 1: the one that sort of got Buffett started that. There's
Speaker 1: many others though, Oh, The Millionaire next Door is another
Speaker 1: wonderful book, classic, another classic. I think you're so right, though.
Speaker 1: We have all this information at our fingertips, but it
Speaker 1: turns out that most of what people are reading is
Speaker 1: stuff that's been written in the last year or two,
Speaker 1: and all these great resources that have proved true over
Speaker 1: time are the ones that we're avoiding. Um And so
Speaker 1: that's to our great shame, really, And so I think
Speaker 1: anybody who's listening to this picking up an older book
Speaker 1: that has to be the test time is a great advice.
Speaker 1: What other big hurdles do you see beginner investors face
Speaker 1: as they're just kind of attempting to dip their toes
Speaker 1: in the water and start. So I think two things.
Speaker 1: I think one is just getting started, right. You know,
Speaker 1: an object in motion tends to stay in motion. And
Speaker 1: the thought can be, you know, I only make whatever,
Speaker 1: I only make X per year, and so it'll be
Speaker 1: a drop in the bucket. It's not going to make
Speaker 1: a difference. And so realizing that inertia cuts both ways,
Speaker 1: that doing nothing can lead you to do more nothing,
Speaker 1: but that even getting started, even in a small way,
Speaker 1: can get you going. And then not knowing where to start,
Speaker 1: you know, not knowing where to start. I read the
Speaker 1: other day that there are now over two hundred and
Speaker 1: fifty thousand different mutual funds. So just doing something like
Speaker 1: a Vanguard Total Index right there, you go start there.
Speaker 1: You know, something that's well diversified, something that's cheap is
Speaker 1: a great place to start and you can figure out
Speaker 1: the rest later. But not knowing where to start, there
Speaker 1: is an overwhelming mountain of complexity. Uh, and you know,
Speaker 1: not much of it is in the investor's favor. So
Speaker 1: just picking a place to start and getting started. But
Speaker 1: I think a a World Index a a total index
Speaker 1: is a great place to start. So that's great advice,
Speaker 1: right for folks who have not yet started investing, for
Speaker 1: folks who are investing but maybe aren't doing the best job. Right,
Speaker 1: That's what we're gonna talk about next. In your book,
Speaker 1: you mentioned how the Mona Lisa it didn't become famous
Speaker 1: until nineteen eleven after it was stolen. Probably my favor
Speaker 1: were story in the whole book, right, I didn't know,
Speaker 1: and then I just got to wow somebody the next
Speaker 1: day about that. It was really cool. It's like, did
Speaker 1: you know, so what does that antidote have to teach
Speaker 1: us when it comes to our own biases? Yes, so
Speaker 1: quickly this story so you can be impressive at cocktail
Speaker 1: parties to the story. The story is, you know, the
Speaker 1: Mona Lisa is the most talked about, the most reproduced
Speaker 1: piece of art around, right, And so we think it
Speaker 1: is that way because it's the best. But really, for
Speaker 1: a long time it was sort of forgotten. It sat
Speaker 1: in this dusty recess of the of the Louver and
Speaker 1: it was only once it was stolen that it became
Speaker 1: sort of an item of national national interest. And you know,
Speaker 1: people are talking about who done it, where did it go?
Speaker 1: Why did why this piece? And what's fascinating it was
Speaker 1: three days before they noticed it was gone. They stole
Speaker 1: the Mona Lisa and no one noticed for three days, right,
Speaker 1: I mean, can you imagine now, like you know sirens
Speaker 1: two seconds later, but three days later, you know, someone
Speaker 1: notices all you know, there's a there's a dusty spot
Speaker 1: on the wall, and and it's missing. And so we
Speaker 1: think the Mona Lisa is is great because we've heard
Speaker 1: of it, but really we having heard of it is
Speaker 1: what made it great. And so the point here is this,
Speaker 1: people tend to overinvest in what they know. Okay, we
Speaker 1: find this a couple of places. One one thing is
Speaker 1: called home bias. Uh. Look at America. The average American
Speaker 1: tends to have about eight five pc of their wealth
Speaker 1: in US stocks, even though US stocks only make up
Speaker 1: about half of the world of the world stage of equities.
Speaker 1: So we want to in general have our asset allocation
Speaker 1: align more or less with the world uh, the world stage,
Speaker 1: so we should be about we're closer to eighty five.
Speaker 1: We even see in various parts of the country in
Speaker 1: the northeast, people tend to be overweight financials. In the Midwest,
Speaker 1: people tend to be overweight agriculture. In Atlanta, people are
Speaker 1: overweight you know, coke and and afflack and things that
Speaker 1: they've heard of. And we think that we're doing ourselves
Speaker 1: a favor by buying what we know because it seems safer.
Speaker 1: This is human nature, like, oh, i've heard of that,
Speaker 1: I know that, so yes, give me some of that.
Speaker 1: And we also over invest in our own company stock,
Speaker 1: even when accounting for, even when controlling for you know,
Speaker 1: employee stock ownership plans and things like that. So you're
Speaker 1: actually loading your risk. You know, let's use Atlanta as
Speaker 1: an example. You're here in Atlanta, you load up on
Speaker 1: coke stock and UPS stock because you want to, you know,
Speaker 1: root for the home team. Well, your home value depends
Speaker 1: on how Coke does and how UPS does. You know,
Speaker 1: your local economy and your ability to stay employed in
Speaker 1: your local economy depends on how these large fortune companies do.
Speaker 1: So when we invest in what we know, we're typically
Speaker 1: triple loading that risk. And also a lot of what's
Speaker 1: in the news is sort of sensational. You think about
Speaker 1: something like cryptocurrency, which has been all over the news lately,
Speaker 1: you know, it feels like you know it because you're
Speaker 1: hearing about it every day, and so it feels safe. Well,
Speaker 1: you know of it, love crypto or hate it. It's volatile,
Speaker 1: and so you know you're you're having heard of it
Speaker 1: doesn't guarantee that it's safe. In fact, it it guarantees
Speaker 1: that it's quite risky. Yeah. I mean in the book
Speaker 1: you mentioned, is it Peter Lynch that had the quote
Speaker 1: of investing what you know and how Yeah, that, in
Speaker 1: fact is pretty terrible advice when it comes to picking
Speaker 1: a stock or or investing in something that you think
Speaker 1: will you know, do well over the long term because
Speaker 1: chances are yeah, like you said, you're just more familiar
Speaker 1: with it, not because it's gonna be awesome. Yeah yeah,
Speaker 1: bye bye. What you know is one of these sort
Speaker 1: of easy Wall Street sayings that it's actually quite dumb. Yeah,
Speaker 1: all right, So what about for experience investors? People have
Speaker 1: been doing in a while. They think they're savvy, they
Speaker 1: have a good strategy, they know what they're doing, but
Speaker 1: often there are mistakes, even for people that have been
Speaker 1: investing for quite a long time. So what what typical
Speaker 1: mistakes do you see a seasoned investor making? So It's
Speaker 1: just like we talked about earlier, how how early success
Speaker 1: can be the hubris that that leads to the downfall.
Speaker 1: I think successful investors can get cocky or they can
Speaker 1: fall prey to this need tom complex complexify. That's not
Speaker 1: a word. We're gonna roll it where. Yeah, we're gonna
Speaker 1: we're making it a word today. They're gonna need to,
Speaker 1: you know, want to make their investments more complex because
Speaker 1: they get bored, right, Like, I'm just holding these you know,
Speaker 1: all you need is a handful of funds if you
Speaker 1: get the right ones, and like, what what am I
Speaker 1: gonna do? Now? How can I put a sexier spin
Speaker 1: on this? And so I think the risk with with
Speaker 1: savvy investors are long term investors is either that they
Speaker 1: get bored with sort of the plane vanilla stuff that
Speaker 1: they're holding and want to go into more esoteric paths,
Speaker 1: or they get cocky. And one of the things that is,
Speaker 1: you know, I talk about sort of these four major
Speaker 1: behavioral errors in the book, and one of the big
Speaker 1: ones is ego. And you have to really, really in
Speaker 1: investing cultivate this beginner's mind, and you have to understand
Speaker 1: that the same uh risk infallibility and foibles that befall
Speaker 1: everyone else. You're just as susceptible to those things is
Speaker 1: the next person. And so thinking that you have it
Speaker 1: figured out is a real risk. And ironically, if you're
Speaker 1: listening to this and you're thinking, well, it's not me,
Speaker 1: I'm I'm humble, I'm cool, you're wrong. Like more this
Speaker 1: it's cool. If you feel implicated in this statement, you're
Speaker 1: probably okay. And if you don't feel implicated, you're in trouble.
Speaker 1: But it's say, you know, investing is full of paradoxes.
Speaker 1: All right, so this is super fascinating stuff. I'm really
Speaker 1: excited to get into kind of some specific questions that
Speaker 1: will I think hone in on how our listeners can
Speaker 1: apply some of these actual behavioral things that happen inside
Speaker 1: of us to specific actions they can take when it
Speaker 1: comes to investing. So we'll get to that with Daniel
Speaker 1: Crosby right after the break. All right, we are back
Speaker 1: from the break. Let's talk now what our listeners need
Speaker 1: to do next. Daniel, we want to specifically talk about
Speaker 1: passive investing. Joel and I. You know, we, along with
Speaker 1: great minds like Warren Buffett, recommend a very basic approach
Speaker 1: to an besting for most folks, in particular folks that
Speaker 1: are just getting started, widely diversified, low cost index funds. Um,
Speaker 1: what would you add to that? What advice would you
Speaker 1: give to folks? So I would say that, you know,
Speaker 1: the active passive debate is one that rages quite ferociously
Speaker 1: in my world. Uh, there are a couple of things
Speaker 1: I think more than how active or how passive a
Speaker 1: vehicle is that I think you need to keep in mind. Okay,
Speaker 1: So one is rules based. So part of why passive
Speaker 1: has one over long periods of time is just that
Speaker 1: it's systematic. And you find even among the best active managers,
Speaker 1: you know, folks like Jim Simons at Renaissance Technology, who
Speaker 1: has had you know, absolutely eye popping technologies and returns. Rather,
Speaker 1: none of us have enough money for him to take
Speaker 1: our phone call, but you know, he he is. He says,
Speaker 1: we have a model and we follow it slavishly. So
Speaker 1: one is you don't want human discretion involved. You want
Speaker 1: an automated, rules based system, or at least a a
Speaker 1: system with a lot of rules and maybe a touch
Speaker 1: of human discretion. Research I did in my book The
Speaker 1: Laws of Wealth found that over two hundred studies were
Speaker 1: done on comparing human discretion to simple rules and algorithms
Speaker 1: and found that nine percent of the time the rules
Speaker 1: beat or match human level discretion PhD level human discretion.
Speaker 1: And that's no work. And you forget it basically, like
Speaker 1: you follow those rules to a t. Yeah, absolutely, so
Speaker 1: you want you want something that's rules based. And even
Speaker 1: when passive vehicles have gotten in trouble, it's because they
Speaker 1: strayed from their rules. Now people don't know this, but
Speaker 1: the SMP five hundred is made up of a committee,
Speaker 1: right that selects who goes in and out, and they
Speaker 1: have these rules about you know, it needs to be profitable,
Speaker 1: it needs to have this many years and they have
Speaker 1: deviated from those rules historically. They did to include A
Speaker 1: O L back in the late nineties, yep, and they
Speaker 1: got crushed, right and they so you hadn't been around
Speaker 1: as long as they be. It wasn't profitable. But people
Speaker 1: were clamoring for it, right because it was the tech
Speaker 1: bubble and it was hot, and they're like, give me
Speaker 1: the A O L. And like they they they buckled, right,
Speaker 1: and they did, but they shouldn't have. And then you know,
Speaker 1: one year later it dropped whatever and they couldn't afford
Speaker 1: to send CDs around all our house. You want that
Speaker 1: annoying dialote noise. Yeah, So you want something that's rules based.
Speaker 1: You want something that's you know, has a reasonable fee.
Speaker 1: You're gonna pay more for small cap, You're gonna pay
Speaker 1: more for international exposure. So don't get so hung up
Speaker 1: on you know, a three basis point fee that you
Speaker 1: that you can't get the exposure that you need. But
Speaker 1: you wanted to be rules based, you wanted to be
Speaker 1: a low fee. Those are the Those are the biggest
Speaker 1: things to me. Yeah, So when you're talking about rules,
Speaker 1: it makes me think of one rule would be to
Speaker 1: automated and dollar cost averaging is one of the ways
Speaker 1: that most of us do that through a four oh
Speaker 1: one K or through just an automatic a c H
Speaker 1: deduction from our one of our checking our savings accounts
Speaker 1: and it goes to hopefully a low cost brokerage account
Speaker 1: company into a ROTHIRA or traditional area or whatever it is.
Speaker 1: So what what other rules besides just keeping it automatic
Speaker 1: and and doing it consistently, what other rules should we
Speaker 1: implement to ensure that we're investing well. So just a
Speaker 1: quick plug for automation there's nothing better that you could
Speaker 1: do than automate. You know. One of the things that
Speaker 1: my research has shown is that our willpower is just
Speaker 1: so much weaker than we think, and so automation is
Speaker 1: the number one thing that I would tell you. The
Speaker 1: second thing I would tell you is sort of counterintuitive,
Speaker 1: and it's too it's to celebrate winds. You know, I
Speaker 1: feel like some people, this journey to financial freedom is
Speaker 1: a long journey, and it takes a ton of money.
Speaker 1: And I start research the other day that says people
Speaker 1: are spending on average two hundred and fifty thousand dollars
Speaker 1: in retirement on medical expenses outside of insurance premiums. I
Speaker 1: we just need tons of money. You just need tons
Speaker 1: of money to retire. So celebrate wins along the way,
Speaker 1: because it really really is a slog And so, you know,
Speaker 1: my family and I were very disciplined, but we recently
Speaker 1: hit a big milestone for us, and we're gonna go
Speaker 1: sploige a little. We're gonna do things we don't usually do,
Speaker 1: and it's gonna hopefully give us that next, you know,
Speaker 1: shot of adrenaline to go the next leg of the race,
Speaker 1: because it's a very, very long race. And I think
Speaker 1: you want to automate, but you want to you want
Speaker 1: to congratulate yourself because saving is hard. Investing is hard.
Speaker 1: One of the big points I make in the book
Speaker 1: is that everything we're asked to do right, to take
Speaker 1: on risk, to take on uncertainty, to take money that
Speaker 1: we could spend today on stuff that would be fun
Speaker 1: and put it aside for old man Daniel, who's not
Speaker 1: very real to me. All of this is psychologically difficult.
Speaker 1: To make sure you give yourself a break along the way.
Speaker 1: I do want to hang out with old man Daniel.
Speaker 1: Old man Daniel is gonna be sweet. Daniel is going
Speaker 1: to be sweet. Cheese cheese every cheese for days, with
Speaker 1: the cheese in a rocky chair. So also, you don't
Speaker 1: have nice things to say about investment managers. They have
Speaker 1: bias as well. Should investor ever pay an advisor is
Speaker 1: a just silly to shell off his fees. Okay, So
Speaker 1: I I work for an investment manager, so I have
Speaker 1: to be careful right now. So I I say in
Speaker 1: my book The Laws of Wealth, you need a financial advisor,
Speaker 1: but not for the reason that you think. Okay, most
Speaker 1: people when they hire a financial professional, they think the
Speaker 1: reason that I'm bringing this person on is because they're
Speaker 1: gonna pick hot stocks for me. They're an investment wizard.
Speaker 1: All of the research shows that, uh, that is not
Speaker 1: the case, right. Uh, financial professionals make the same dumb
Speaker 1: mistakes with their money that we do with our money.
Speaker 1: But the research also shows that people who work with
Speaker 1: a financial professional tend to do two to three percent
Speaker 1: a year better than those who don't, even net of fees.
Speaker 1: And that's because they're a behavioral coach. They keep you
Speaker 1: from doing the stupid thing. They they encourage you to
Speaker 1: do the hard thing. So I think about ten percent
Speaker 1: of the world does not need a financial professional in
Speaker 1: their corner, or does not need a robo advice or
Speaker 1: any sort of advice. They're going to figure the stuff out.
Speaker 1: They're gonna do it by themselves. They've got the discipline.
Speaker 1: Ten Another ten percent of the world, on the other end,
Speaker 1: are just degenerate gamblers. There's not you know, there's not
Speaker 1: enough good advice in the world to to save these folks.
Speaker 1: But for a lot of people in the middle, whether
Speaker 1: it's uh, you know, a full service financial advisor, whether
Speaker 1: it's sort of the on call financial advice that's available
Speaker 1: now through Schwab and Vanguard and other people for as
Speaker 1: little as thirty bucks a month, or whether it's a
Speaker 1: robo advisor. Most of us needs some sort of framework,
Speaker 1: and you can ratchet that up or down depending on
Speaker 1: how disciplined you are. But I would say that almost
Speaker 1: all of us need some sort of hand holding, some
Speaker 1: sort of guidance, and that is the number one thing
Speaker 1: that an that an advisor or an advisor light does,
Speaker 1: and its behavioral coaching and not asset selection, because you can,
Speaker 1: I mean, you can take this weekend, read five books
Speaker 1: and figure out how you should allocate your assets. It's
Speaker 1: quite easy. It's very very easy to get a low
Speaker 1: cost diversified portfolio. It's much harder to day of the course. Right,
Speaker 1: So it's not like you said, it's not the asset
Speaker 1: allocation part of it. It's the behavioral part of it
Speaker 1: that's the tricky part. Um I mean, is that not
Speaker 1: where you feel that a robo advisor could, you know,
Speaker 1: for a low cost kind of keep you on that
Speaker 1: path of making sure that you're you know, you've got
Speaker 1: your pie selected and you're rebalancing and you're you're sticking
Speaker 1: to what you want to invest in would that be
Speaker 1: a way that folks could could save money and not
Speaker 1: pay higher fees potentially. So there's there's really three things
Speaker 1: that I think folks need. They need education, you know,
Speaker 1: to to do the right thing, and a robo advisor
Speaker 1: provides that they need the right environment, which is the
Speaker 1: portfolio in this case. The robo advisor does that as
Speaker 1: well as anyone um. And they need just in time advice.
Speaker 1: They need someone to like slap the bad decision out
Speaker 1: of them at the at the inopportune moment. And so
Speaker 1: that is where I think that robo advisors candidly are
Speaker 1: a little unproven, just because most of them have only
Speaker 1: existed in a relatively sanguine market. Right It's been a
Speaker 1: very good run for as long as the wealth fronts
Speaker 1: and betterments of the world have been around. Now Better
Speaker 1: and in particular is doing really cool stuff with behavioral finance.
Speaker 1: Dan Egan is their head of behavioral finance. Does an
Speaker 1: excellent job and does things like, you know, if someone's
Speaker 1: about to sell, the robo advisor will pop up a
Speaker 1: thing that says, here are your tax consequences if you sell,
Speaker 1: and people go yuck, like you know, I hate paying taxes.
Speaker 1: You know, and so then they're induced, oftentimes to to
Speaker 1: stay the course. So there are subtle nudges that I
Speaker 1: know that robo advisors are are working on. But I
Speaker 1: think for some people still you need Bob down the
Speaker 1: street to call you up, to come to your house
Speaker 1: and say, hey, man, chill out. So I think that
Speaker 1: for some people that will work, for some people that won't.
Speaker 1: And I think that robo advisors are still kind of untested,
Speaker 1: and nobody's more excited to see how they do than
Speaker 1: me when where you know, we have a leg down. Yeah,
Speaker 1: I mean, I remember during the Great Recession talking to
Speaker 1: co workers, and people were panicked, and a lot of
Speaker 1: folks that I knew just weren't willing to stay the course.
Speaker 1: They just couldn't handle the heat in the kitchen, and
Speaker 1: they said, I have to sell, I have to make
Speaker 1: some changes, I have to put more of my money
Speaker 1: in cash because I just I can't ride this ride anymore.
Speaker 1: And I do think that you're right that the number
Speaker 1: one reason to consider having a financial advisor is if
Speaker 1: you have a personality where you are unable to stay
Speaker 1: the course, where you're unable to obey those rules that
Speaker 1: you've set for yourself, I think in a perfect world
Speaker 1: because Matt recently on the show, we talked about fees
Speaker 1: and the importance of fees right when you include your
Speaker 1: financial advisor, and that oftentimes the fees become excessive and
Speaker 1: a lot of people just don't have a lot of
Speaker 1: people won't can't even be seen by a financial advisor
Speaker 1: because they don't have enough money, right, And then there
Speaker 1: are a lot of people who balk at the fees
Speaker 1: because that hurts returns over time. But I do completely
Speaker 1: understand your sentiment, and I think it makes a lot
Speaker 1: of sense that a lot a lot of people are
Speaker 1: unwilling to continue abiding by their rules and to continue
Speaker 1: to invest consistently even through the hard times, even though
Speaker 1: that's the most important time to to continue to be invested.
Speaker 1: So I think that makes a lot of sense. If
Speaker 1: you look at the research on the behavior gap, so
Speaker 1: the delta between the returns of the equity markets and
Speaker 1: what the average equity investor gets, it's usually somewhere around
Speaker 1: fort So like over the last thirty years, SMP has
Speaker 1: given you eight and a quarter percent, the average investors
Speaker 1: kept like four and a half percent of that, So
Speaker 1: they're in and out because they're in and out. So
Speaker 1: paying an advisor one percent, which is admittedly a lot,
Speaker 1: Like paying an advisor one percent is a lot if
Speaker 1: you can do it by yourself. But if it saves
Speaker 1: you a four percent delta, then it's well worth it.
Speaker 1: And so it comes down to sort of being candid
Speaker 1: about your level of discipline and willpower. Uh, And that's
Speaker 1: a that's a hard thing to do. It's a hard
Speaker 1: thing to look in the mirror and go, yep, I'm
Speaker 1: the I'm the one the biggest problem. I'm the du
Speaker 1: fist that's gonna sell at the wrong time. And yet
Speaker 1: you know most of us are so yeah. So it's
Speaker 1: almost like we don't need a Bob down the street.
Speaker 1: We need a Terry Crews to like come and like
Speaker 1: totally check us, right, to flex his pet and tell
Speaker 1: us that we better stay the course. So, Daniel, for
Speaker 1: most folks that that don't have a ton of money, right,
Speaker 1: maybe they've got five or ten or twenty thousand even right, Like,
Speaker 1: that's not a ton of money to be seen by
Speaker 1: an individual advisor. Sometimes, what advice would you give to
Speaker 1: someone in that situation who is looking to be a
Speaker 1: better passive investor? How do you set up those rules
Speaker 1: that you mentioned earlier. Yeah. So the first thing, and
Speaker 1: this is again a little non traditional, I would say
Speaker 1: to invest in yourself. You know that you can't bleed
Speaker 1: a stone, so it takes income to be a successful investor.
Speaker 1: And so one of the most powerful things and most
Speaker 1: ignored pieces of financial advice is taken online course. You know,
Speaker 1: go back to school, do what you need to do
Speaker 1: to get your income to a place where you can
Speaker 1: say more. So that's investing in yourself always pays great dividends.
Speaker 1: That The next thing that I would say is again
Speaker 1: just get started, and you can again take a lot
Speaker 1: of risk. I think when you don't have much to
Speaker 1: set aside, just find one or two funds that are
Speaker 1: going to cover the water front of the whole world
Speaker 1: for very, very minimal fees. I get get that going
Speaker 1: and make sure that it's automated, because once it's automated,
Speaker 1: you never know, you miss it, you never see it,
Speaker 1: and and it won't hurt you avoid the pain of saving,
Speaker 1: because all of my research is shown there's a lot
Speaker 1: of psychological pain with you know, taking money and going well,
Speaker 1: I'm going to save this. Now, you avoid that pain
Speaker 1: of saving when you automate the withdrawal process like you
Speaker 1: talked about before, So invest in yourself automated and celebrate
Speaker 1: those winds along the way. Yeah. I think if you're
Speaker 1: in the wealth building phase of life, like you just said,
Speaker 1: like you don't have tons of money, whether you're twenty
Speaker 1: or whether you're forty five, you can afford to take
Speaker 1: one more risk with your investments. You don't have to
Speaker 1: be in a target retirement fund that's exactly matched to
Speaker 1: your age because you won't have as much risk and
Speaker 1: really what you want, you want exposure at that point
Speaker 1: in time where you're beginning to invest, no matter what
Speaker 1: your age you're at right, Yeah, absolutely, well, Daniel, thanks
Speaker 1: so much for for joining us today. We've really enjoyed
Speaker 1: talking to you about behavioral investing specifically. I mean, there's
Speaker 1: just so much employ other than just knowing the right
Speaker 1: decision to make. There's so much in play kind of
Speaker 1: between our ears, right, Like our own minds are oftentimes
Speaker 1: the uh, the our worst enemy. So we really appreciate
Speaker 1: you sitting down with us. Yeah, it's been it's been
Speaker 1: my pleasure. Thanks for having me, guys. Yeah, thanks for
Speaker 1: coming in. Man, all right, Matt, that was a super
Speaker 1: fun conversation. I mean, like, honestly, I truly enjoyed Daniel's book.
Speaker 1: I think I'm just fascinated by the way our brains
Speaker 1: play trickery on ourselves and and ultimately it ends up
Speaker 1: hurting us as as humans and as investors. Right, it's
Speaker 1: just fascinating, fascinating conversation. Yeah, it's It's definitely true. Man,
Speaker 1: Let's go ahead now move on to our beer. Daniel
Speaker 1: was gracious enough to show up with some Atlanta brewing companies,
Speaker 1: Hop Lanta, which is an I P A and will
Speaker 1: you ever get tired of I P A? Joel n
Speaker 1: Man Never? And this one was was interesting and had
Speaker 1: a nice little citrus zest kind of to it, but
Speaker 1: it also had kind of that classic I P A
Speaker 1: bitter taste as well, so it kind of balanced, in
Speaker 1: my opinion, the new style of I pas and the
Speaker 1: old style, and I think it did it quite nicely.
Speaker 1: And plus it's a hometown beer. We gotta love it. Yeah,
Speaker 1: We're pretty much always gonna be fans of local Atlanta breweries.
Speaker 1: And this one was Atlanta's first original brewery, so they
Speaker 1: actually recently changed their name back to Atlanta Brewing company. Jell.
Speaker 1: You remember when they were a red brick, but they're
Speaker 1: red brick there for a while and then they kind
Speaker 1: of changed back to that moniker Atlanta Brewing Company. Those
Speaker 1: are sad days when they were red brick for multiple reasons.
Speaker 1: The beer wasn't very good either. But they've got a
Speaker 1: new brewer at the Helm at Atlanta Brewing Company, and
Speaker 1: their beers have just gotten a whole lot better. The
Speaker 1: branding is is sweet, and yeah, I thought this beer
Speaker 1: was great. All right, Matt, And it's time to give
Speaker 1: away three copies of Daniel Crosby's new book, The Behavioral Investor.
Speaker 1: And if you nerd out on kind of psychology, physiology
Speaker 1: and just kind of how that affects, you know, how
Speaker 1: we invest, then you will really really like his book.
Speaker 1: And he was kind enough to not only donate the
Speaker 1: beer that we had on the show today, but also
Speaker 1: to have donated three books for our listeners to get.
Speaker 1: And so, Matt, you want to go into the details
Speaker 1: of how folks that are listening can qualify for the
Speaker 1: book give away, Yeah, Jeel, Like we've done in the past,
Speaker 1: what you need to do to end true into the
Speaker 1: book giveaway is head over to Apple Podcasts and just
Speaker 1: leave us a solid review. And if you're not an
Speaker 1: Apple person, if you're an Android person like me, you
Speaker 1: know what, you can also leave a review. It's Stitcher
Speaker 1: and you can do that through your web browser, so
Speaker 1: you don't even have to do it through the app
Speaker 1: on your phone. It's super simple. And once you leave
Speaker 1: that review there for us, please send us a quick
Speaker 1: email at how to Money pod at gmail dot com
Speaker 1: letting us know as well as your screen name that
Speaker 1: you left that review under. We'll have that giveaway going
Speaker 1: all this week and we're going to close that down
Speaker 1: on Friday at five pm. We'll announce that new winner
Speaker 1: on the next Monday's episode. So thanks in advance to
Speaker 1: everyone for doing that. Sweet all right, time to close
Speaker 1: out another good episode. Oh and by the way, we'll
Speaker 1: have show notes up for this episode on our website
Speaker 1: how to money dot com. So, Joel, I think that's
Speaker 1: gonna be it for this episode. Man, Until next time,
Speaker 1: Best Friends Out, Best Friends Out.