The Behavior Gap – Book Review

The Behavior Gap

I just finished reading The Behavior Gap from Carl Richards. There is no other way to put it, its a great book! The book is an easy read and Carl shares his insight working as a financial advisor/Certified Financial Planner and the observations he has made over the years of how people make the same mistakes over and over. This book is an ever-green read that will stand the test of time as it is generic enough to hold true now or a decade from now.

About the Author

Carl Richards is a certified financial planner and the director of investor education for the BAM ALLIANCE, a community of over 130 independent wealth management firms throughout the United States. He is the creator of the weekly Sketch Guy column in the The New York Times, and is a columnist for Morningstar Advisor.

Takeaways From the Book

  • The author does not try to offer financial advise and does not have a particular stock recommended in the book. So, if that’s what you are looking, this isn’t the book for you.
  • The book is more of an insight into the human psychology and how it plays havoc in our financial planning.
  • The author offers plenty of stories to accompany his points and while some of the figures were a bit overdone and pointless, most sketches get the point across very clearly. My favorite is the sketch on the cover of the book which shows how people ride the greed/fear cycle over the years and let it dictate their investing decisions to lose their hard owned money.
  • One of the central themes that I really liked from the book was how he points out that its more about life planning than financial planning per se. If you focus on planning your life, your financial plan will fit into (or will need to fit into that) accordingly.
  • Plenty of stories that illustrates each of his points that I thought was a nice touch. By doing so, the author kept things fresh, which made for an easy and refreshing read.
  • It is important to talk and trust your financial advisor. The author notes that one plan does not fit everyone and illustrates the point with stories where it might appear that something is a bad investment, but may make sense depending on the personal situation.
  • The author makes it a point to drive across the point that it is important to stick to the plan – and not get swayed by what the stock market is doing on a day-to-day or week-to-week basis. It is the knee-jerk reactions that end up costing us over the long run.

Recommendation

I highly recommend this book to one and all. Whether you are a new investor just starting out, or a seasoned investor, I think its a great read. It is important to keep in mind that this book is not going to give out a secret to get rich quick or provide recommendations one way or another, but provides illustrations that are thought-provoking in understanding the human psyche and how it plays a huge part in market cycles. It is important to focus on the life planning and the financial planning will/should fit into that.

Have you read this book? What did you gather from the book? Share your thoughts below.

 See my other book reviews here.

12 thoughts on “The Behavior Gap – Book Review

  1. R2R,

    Sounds like The Behaviour Gap is right up my alley! I love reading about behavioural economics and the human psychology with regards to money.

    Thank you for sharing. I’ve added it to my wishlist on Amazon… Let’s hope one of my family members picks it up for my birthday or something. 😉

    Best wishes,
    NMW

    • NMW,
      Its probably one of the first ones that I have read on behavioural econ, so I dont have a reference point…but it was an interesting read nonetheless.

      Haha good luck with your wishlist and getting someone to buy it.
      R2R

  2. Hey R2R,

    I really like reading book reviews, especially ones by people like you who are obviously knowledgeable about the topic at hand. I have not read this book yet, but it looks like a great read given what you’ve said. I especially like books that are evergreen, as it’s something one can hopefully come back to on and off over the years as a great point of reference.

    Definitely one for my wishlist.

    Cheers

    • M,
      Glad you enjoyed the review. The behavioral econ subjects tend to be evergreen imo, as human psychology does not change much over generations. So, it sure will relevant for a long time. Would love to hear what you think of it if and when you read it.

      cheers
      R2R

    • Tawcan,
      Good to hear from you. I recently saw that Carl is in the process of finishing/completing/releasing his next book and its already getting some attention from some bloggers, so theres a new one to check out.

      R2R

    • Hey Bryan,
      Glad you were able to find and reserve it at the library. Things are going well – excitedly waiting for the snow to melt 🙂

      Hope things are well with you. Its been a while since we spoke. Let me know if you are free one of these weekends.
      R2R

  3. R2R,
    Very interesting book based on your takeaway, I might check it out today at the library if I have the time. Hopefully they have it though.

    I like the part “something is a bad investment, but may make sense depending on the personal situation.” and sticking to the plan. Its a constant reminder of pay no attention to the ‘noise’ and look at the long term goal.

    Thanks for sharing,
    FFF

    • FFF,
      Hope you find the book in your library and get to read it. It was a short and easy read – so, Im sure you will go through it quickly.

      I saw a quote somewhere online which was attributed to Buffett – something along the lines of – people who win are not the ones focused on the scoreboard, but whos mind is in the game. Thought that it was a great insight and similar to the point that Carl was making on focusing on the life planning side of things and not to be gyrated by the market moves.

      Best wishes
      R2R

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