The Behavior Gap

Carl Richards
2 min readOct 18, 2018

I want to try and make one very narrow, very simple (but not to be confused with easy) point.

The point I want to make is this:

Investor behavior matters.

It probably matters even more than skill.

The clearest evidence of this fact is that investment returns and investor returns are almost always different.

You earn the investment return if you invest your money and then don’t touch it. No buying, no selling, just holding.

But real people rarely invest this way. Real people chase performance and invest by looking in the rearview mirror.

It is precisely the hunt for the best investment that creates a phenomenon I have called The Behavior Gap, the result of which is well documented. Because of classic behavioral mistakes, average investors almost always do worse than average investments.

I could write a book on how to go about closing the gap (oh wait, I did!).

But let me just close with a question: Do you want to know more about the behavior gap?

Because if enough of you do, I’m happy to talk more about this subject. Think of this newsletter as an interactive experience! You have some say in what you read.

Just email me at, and let me know what you think.

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Carl Richards

Making things elegantly simple one sketch at a time. Creator of the New York Times Sketch Guy column.