The Behavior Gap

Simple sketches and smart advice offer a less stressful way to think about money. In his work as a financial planner, Carl Richards observed a paradox: The return of the average investor was dramatically lower than the return of the average mutual fund. In theory, this gap shouldn't exist, and it meant people were leaving money on the table. He named this phenomenon the Behavior Gap and found that sketching it out on a whiteboard made it much easier to understand. Richards's simple sketches and straightforward advice are reframing the conversations many people have around money. Despite our efforts to be smart investors and savvy savers, many of us approach our personal finances with a set of false assumptions that actually end up hurting us. It's not our fault. We haven't been given the right tools for looking at the problem. Richards argues that people who have managed to build wealth successfully aren't necessarily smarter than those who haven't-it's just that they have learned to focus on what really matters. The Behavior Gaphelps readers ask the right questions to change the way they think and talk about money so they can get on with their lives.