After reading The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money, by Carl Richards; I was encouraged that I didn’t need to be a genius to understand how investing works.
Don’t worry this isn’t your regular “boring investment book”. It’s a simple and easy to understand book that gives advice about investing and finances in general, with a different spin.
The illustrations (aka sketches) are done with a sharpie and white napkin. It’s this simplistic approach that’s intriguing and not boring at all. It easily makes the list as one of my favorite books.
What is the Behavior Gap?
The Behavior Gap is the difference between investment returns and investor returns. Here’s how Carl explains it:
“In general, we’re bad investors,” says Carl. “We tend to buy high, sell low. This behavior creates a gap between investment returns and investor returns.”
Carl believes success with investments and the stock market isn’t about skill, but rather behavior. This shifts more of the blame onto financial advisors (and ourselves) for reacting too emotionally and not using a little common sense.
About the Book
This book is divided into 10 chapters totaling 176 pages:
- Chapter 1 – We don’t beat the market, the market beats us
- Chapter 2 – The perfect investment
- Chapter 3 – Ignore advice, make fun of forecasts
- Chapter 4 –
FinancialLife planning - Chapter 5 – Too much information
- Chapter 6 – Plans are worthless
- Chapter 7 – Feelings
- Chapter 8 – You’re responsible for your behavior (but you can’t control the results)
- Chapter 9 – When we talk about money
- Chapter 10 – Simple. Not easy
At the very beginning of the book during the introduction, Carl talks about owning four pairs of skis. Which is a simple analogy for us to understand that sometimes having more options, means more confusion and less simplicity. Having too many complicated options causes a lot of stress and leaves room for too many mistakes.
Some of My Favorite Sketches
It’s pretty hard not to completely enjoy this book, since it caters to those who enjoy reading as well as a visual audience of readers. Here are two of my favorite sketches from the book.
Our current investing strategy
Our current spending strategy
Are you seeing the common problem here? When Carl explains it visually like this, it’s hard to refute that we don’t always use the smartest methods when it comes to our finances. These black and white sketches easily support “a picture is worth a thousand words”.
I highly recommend this book and once you start reading it, I promise you won’t want to put it down. It’s one of those books I’ll grab when I need to remind myself to calm down, and think about investing more logically.
About the Author
“Carl Richards became an accidental artist with his simple sketches that make complex financial concepts easy to understand for thousands of people every week on The New York Times Bucks blog. Richards’ art, which he refers to as Visualizing Finance, had its first showing at the Kimball Art Center, in Park City, Utah. His commissioned work is on display in businesses and educational institutions across the country.” - Source
Connect with Carl or Buy the Book
[I did not get paid to write this, and I did personally read the book. As always, the opinions expressed are my own.]
Photo Credit: BHG
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