I'm Stephanie Sammons, a CERTIFIED FINANCIAL PLANNER™ and the Founder of Sammons Wealth Management. I help successful women professionals who are in midlife plan for their ideal retirement. Learn more about planning, saving, and investing for your ideal retirement at Sammons Wealth Management.
Becoming a Better Investor by Managing Your Behavior with Dr. Daniel Crosby

Show Notes for this Episode:

Dr. Daniel Crosby is a behavioral psychologist and a New York Times Bestselling Author. I was thrilled to have him join me on the podcast to talk about how to become a better investor by managing your behavior.

As human beings, we tend to naturally impede ourselves when it comes to making good investment and financial decisions. The truth is, we are not wired to prevail in the face of uncertainty, risk, and taking actions today that can positively impact our future financial situation. That’s why it can be so difficult to stay invested throughout volatile markets.

We don’t behave well when it comes to our financial lives because our emotions tend to get the best of us! There is an entire field of study on behavioral investor psychology, and Dr. Daniel Crosby is at the forefront of this discipline.

Daniel and I discuss what the major behavioral tendencies are that can sabotage our financial success, why women tend to outperform men when it comes to investing, how to imagine our future selves in retirement (so that we can make good financial decisions today for the future), and much more in this episode!

Daniel also shares some fantastic insights about why finding balance between today and your future retirement years is so important.

I think you’re going to really enjoy this one!

What you will learn in this episode:

  • What is behavioral investing and how does it affect you personally
  • The 4 behavioral tendencies that can cause you to make poor investment and financial decisions
  • Why women are better investors than men
  • Which is more dangerous – selfies or shark attacks?
  • How working with a financial advisor can add approx 3% per year to your investment returns
  • Why ongoing work and contribution (even through retirement) is so important
  • Why celebrating your wins along the way matters

Want more of Dr. Daniel Crosby?

Be sure to check out this related podcast post: 5 Behavioral Investor Mistakes to Avoid

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Welcome back to the retirement money gal podcast. I'm your host, Stephanie Sammons certified financial planner. And welcome to episode 62. This is actually going to be the last episode of season four. Now I really enjoy producing my podcast in seasons because it gives me a chance to kind of think about what topics I want to bring to you. And in a way it's kind of like Netflix, like waiting for the next season of one of your favorite shows. Now I'm not saying this podcast is one of your favorite shows compared to a Netflix, but hopefully you are getting something out of each and every episode that she listened to, it also gives me a chance to think about the kind of educational content and information, and even guest to have on the show for each season where I can group into themes and topics that kind of go together.

Now this year has been very unusual because of everything that has happened in 2020. So I've spent a lot of time on current events and what's happening in the economy and in the markets. And I will continue to touch on current events, probably at least once a month on this show, but I'm also going to be doing more Q and a episodes where I answer your questions on the show. I'm going to be doing an interview each and every month. At least that's what I'm shooting for. And then of course teaching you about the financial aspects of creating a secure retirement that gives you peace of mind, and also just the lifestyle aspects of what we go through as we move toward retirement from midlife. So there's a lot there that can be covered and breaking the podcast into seasons gives me a chance to get really organized and focused on what I want to deliver to you and the way that I want to prioritize that.

So the other thing is it gives you a little bit of a break, gives you some time to catch up, maybe on some old episodes that you missed, but also digest everything that you have heard. And I really appreciate you listening to the show and I encourage you to continue to send me your questions. You can email me directly at Stephanie at retirement money, gal.com. And I'd love to hear from you, and please send me your questions about retirement, about money in midlife. And anything else that you'd like to hear about that is related to the life phase of moving to and through retirement. Whether it's a lifestyle question, whether it's business, career health and wellness or a financial question, these are all the areas that I really like to focus on with this podcast, because life is not just about money, right? It's about living our best lives now and also creating peace of mind for our future selves.

As we go on into our retirement years, I'm very excited today to bring on my first guest to the show. And his name is Daniel Crosby. Daniel has a PhD in psychology, as you will hear. When I introduce him, he's written two New York times bestselling books about really how our psychology affects our behavior when it comes to money and investing and making good financial decisions, money is emotional and the way we are wired, isn't actually the best thing when it comes to making good financial decisions. As you will see when we get into this interview. So before I bring that to you again, I want to thank you for listening to the retirement money gal podcast. Please share it with your friends, share it on social media, the episodes that you enjoy, you can actually share them directly from whatever podcasting app you listen to podcast on the iTunes or Apple podcast, app, Spotify, Google play, Google podcasts.

I'm basically on all of those different channels. And the other thing is if you're enjoying the show and you're getting a lot out of it, I would really appreciate you letting me know, leave me a review. And the best place to do that is within Apple podcast. You can do it right there within the app. You can give it a star rating, one to five, hopefully you'll choose a higher star rating than a lower star rating. And you can also submit a quick written review with your comments. And I would really, really appreciate that. It helps the podcast get discovered by other women who are like us, who are women professionals, hardworking professionals who are in midlife and retirement is our number one financial goal that we are trying to solve for. Oh, and one other thing, the audio in this interview is not the best because I failed to record two separate audio channels. So I just wanted to let you know that it's still pretty good, but our audio levels are a little uneven. So I apologize for that. And I will definitely get better at that. Okay. So without further ado, let me bring to you the very first interview on the retirement money gal podcast, Daniel Crosby.

Well, I am thrilled today to be joined by Daniel Crosby. Daniel is a PhD. He's got a doctorate in psychology. He's a New York times bestselling author of two books, the laws of wealth and the behavioral investor. And I love this one. Daniel says he's a mediocre guitar player. I am also a guitar player and I bet you're not mediocre, but anyway, and he loves to explore the American South. Welcome Daniel.

Thank you. It's wonderful to be here. And I am truly mediocre. Mediocre is, may be generous, but thank you. It's great to be here.

I love that you play the guitar. And I had forgotten that because Daniel and I have kind of become acquainted on Twitter, where many of us in the financial industry hangout. And I'm curious as to what got you interested in playing guitar. I mean, what do you enjoy about it?

So, I mean, if we need to be honest, right? Like we need to be honest here today. Candor's part of what makes a good podcast. So when I was 15 years old, maybe 16 years old, I'm the lead singer of counting crows was dating. Uh, Jennifer, one of the women on friends, Jennifer Aniston, or Courtney Cox. I can't remember he was this, uh, extremely sort of scraggly looking and unattractive guy. And as a scraggly looking unattractive guy, myself, I said, you know what? I think there's maybe something to this being a guitar player, being a rock star thing. So I mean, quite literally that, that is why my friends and I started our high school band. So we could, uh, so we can try and pull off what counting crows had pulled off. So it didn't didn't have much success that there, but that was the, I wished I had loft your reasons, but to, to meet girls was the, was the reason why

I'm impressed that you were in a band. So that's, that's something I always dreamed of, but you know, it never really happened.

We, um, we want our high school talent show. That was the peak of my musical, uh, uh, payments

Is greatness. Well, I, as you know, I play guitar as well. I find it to be very therapeutic. And, um, my listeners know too that I've, I have a, a side gig singing singer songwriter career. That's been really fun even though I don't know who I'm fooling at my age to be out there, you know, being a Taylor Swift, but it's still very fun and it keeps me young.

Yeah. It's something I try and do a couple of, I try and play a couple of times a week. It's just meditative. It's fun. Uh, it activates a part of your brain that I think doesn't get activated in our day jobs in finance. So it's a, it's a fantastic hobby.

Absolutely. It's the other side of the brain.

That's right. It is. It is. Yeah.

I think it's so important to have some kind of art that you spend time, some kind of creative activity where you spend time. It's just so therapeutic. It's so good for us.

Yeah. I abs I absolutely agree. And weirdly the older I get, the more important art becomes to me, like the older I get, I really feel like being creative in the broadest sense possible is kind of what life is all about. So whether that's, you know, writing a song or painting a picture or, um, you know, touching someone's life or starting a business, I really think, uh, being created is what it's all about. So it's something, uh, I'm happy that you're engaged in and something that I try and do as well.

Yeah. I could not agree more. I think that's awesome. So you're a doctorate in psychology and I know, you know, your, your books, your book titles are a dead giveaway for our listeners, but what got you interested then in investor behavior, this concept of human behavior, behavioral economics, the financial side of psychology, so to speak, I'd love to understand that better.

Sure. So I took sort of a long and winding road to the place that I am now, but that's true. I think of most people who become behavioral economists or behavioral finance experts like myself, because it's a little bit of a mutt of a discipline, you know, it's sort of sits at the intersection of, um, you know, clinical psychology, social psychology, economics, finance, investment management, it's sort of a multifaceted discipline. So until recently there hasn't been a very direct path there in terms of, of schooling. So for me, in particular, I grew up, I mean, I'm the son of a financial advisor. My dad is a, you know, still to this day, a practicing financial advisor and, uh, in my hometown. And so I grew up, you know, having conversations around the dinner table about how to invest. And I always joke, but I'm, I mean, I'm not joking.

Debt was a four letter word in my house. Like my dad fizz, you know, would not let us say the word debt in my house. So I grew up, um, with messages around money and familiar familiarity around money and investing in ways that I think most people do not. But the thing that got me into psychology was actually I had a loved one. Uh, I had a loved one who had an eating disorder. And so, uh, you know, someone, I was very close to came down with, uh, you know, a pretty severe eating disorder. Was it an inpatient treatment center, uh, near where I was attending college and as part of, you know, just because I loved her, I was out there helping her and visiting her and, uh, interfacing with the doctors. And when I saw what went on the work of psychology, it just seemed so fascinating and so meaningful to me.

And so that's when I switched my career. I, you know, I was sort of early on in my college years, I was, um, on track to become a financial advisor, uh, that, that experience with my, with my relative, uh, put me on that new psychology path. And then long story short, I started a PhD in psychology three days after I finished my bachelor's. So I just went straight into it. And about three years into my doctoral program, I candidly just started to burn out like just, you know, talking, talking, um, to people 40 or 50 hours a week, people who are experiencing, you know, really heavy problems, people who are suicidal, you know, in some cases, people who were, uh, criminals who had been sent to me, you know, by the court, it just became like very, very heavy, uh, for me personally. And so I started to look for ways to apply psychology that were nonclinical and, uh, you know, long story short.

My first job out of, uh, out of college was at a bank doing preemployment assessments of bankers. So before the bank would hire a, you know, a high paid executive, they would bring me in to test the, the individual's IQ and their personality and their fit with the culture. And it was in the bank that I became exposed to sort of the tenants of behavioral economics and the rest is history. So I was, uh, I was on track to be a financial advisor, then a psychologist. And then I became a psychologist who works with financial advisors. Wow.

Wow. Isn't that funny? How everything, uh, well, everything makes sense. Now when you look back at it, but like you said, it's just a winding path that we're on and, or like, I've heard you say before, it's, um, that's really cool. It seems purposeful in a way, even though it didn't feel that way.

Yeah. It's nice to be at a place now where it all makes sense. You know, we, don't always, you know, we don't always have that perspective moment to moment, but it's nice where, you know, sitting here today, talking to you, I'm in a really good place. Uh, when I was whatever, 26 years old and hating hating the work of a clinic clinical psychologist, I was less certain that I had chosen the right path, but, uh, I'm happy today.

Yeah. I can imagine that would be a super tough career. And, um, I mean, I know for me, it would be very difficult cause it would, it would suck your energy and your emotional energy in so many ways. But I have a lot of, uh, respect and admiration for the people out there who do that work because it is so important, but, but your work is important too. And I love the path that you ended up choosing and there's so much education needed in the space of financial and investor behavior, behavioral economics. And I feel like we're really just scratching the surface in terms of financial advisors are now becoming more educated about this and learning from people like you, experts like you and getting a much better understanding of what really helps our clients have longterm success in their financial lives, but clients and the general public still don't really know about all this stuff.

And so I think we're just beginning that process of where it's starting to filter out, maybe through the financial advisor community, to their clients, what this is all about and how behaving well as an investor is really the most important thing. And that's why I wanted to have you on, because I wanted to ask you some questions and get your thoughts and your insights on how we can become better behaved when it comes to our financial lives and investing and especially working toward retirement. Cause a lot of my listeners are in midlife just like me, they're they're 50 plus. And that is retirement is the biggest goal that they have. It's going to be the biggest decision of their lives. And so I wanted to talk with you about some things that, where you could shed some light for us. Does that sound good?

Let's do it. Okay, great. So

Obviously we've had a really tough 2020 as we were talking about earlier, it's been a crazy year. None of us could have ever anticipated what would happen this year, what we were faced with and what we continue to face. We continue to have some challenges from this global pandemic that we've experienced. And I want to ask you, what, what do you think are the primary behavioral or cognitive biases or issues that are working against us now in times of such great uncertainty and I'll just I'll stop there.

So it's, it's a great question. One of the, um, biggest professional projects that I've taken on is it in my books, um, I've outlined four primary behavioral tendencies, uh, four primary behavioral tendencies that drive most of our especially investment decisions, but, but all financial decisions. And so these are, uh, ego emotion, attention and conservatism. So I can I'll touch on each of those quickly. And then we can take them where you'd like, um, ego is this tendency to be overconfident and it takes a couple of specific forms. So one of the things we know is that people tend to think that they are just better than average. You know, we tend to think we are better, uh, you know, w we're whatever, better looking smarter, uh, you know, better drivers, more honest you, I could go on. Right. Um, we tend to think that we are superior to the average person.

Uh, when in fact on average we are pretty average. So that is one piece of it. Um, the second piece of it is we think we can know the future with greater precision than we can, right? So we think we can kind of forecast what's coming. Hopefully 20, 20 has finally blown up that tendency for once and for all, because I don't know about you, but I didn't see any of this coming. And then, uh, you know, the, the final thing is that we think we're luckier. You know, we think we're luckier than average. We think that, you know, we know that, you know, about half of Americans, uh, marriages end in divorce, but if you ask people, you know, will, you know, you ask people, well, your marriage and divorce, and basically no one says, yes, you ask people, you know, will, will their marriage end in divorce.

And everyone goes, yeah, that's about a 50 50 chance. So, you know, we can be dispassionate, uh, about other people and their luck, but we tend to think that we are luckier than average, uh, emotion. Just what it sounds like the tendency to sort of, uh, think with our heart and not with our head when making financial decisions, uh, attention is our tendency to confuse things that are sort of, uh, lurid or newsworthy or sexy with things that are likely. And in fact, they tend to not be the same thing at all. You know, the funny, the kind of the funny example I give here is selfies and shark attacks. So, you know, many, many more people die every year taking selfies than, than do, uh, with, with sharks and yet keep cause people, you know, take a selfie and drunk, drunkenly stumbled into the street or something, um, you know, being, being inattentive, but, you know, sharks killed one or two people a year, but you know, no one's scared of selfies and everyone's scared of sharks because one is easier to imagine, right?

It's, it's, it's more Laureate, it's sexier, it's more vivid. So we tend to confuse the lurid newness or the vividness or the salience of stumping with its likelihood. And then the last one is conservatism, which is just the, the human tendency to, to have, uh, to prefer what, you know, to tend to want to kind of go with the status quo and to also be loss averse. So we know from the behavioral research that people hate losses about two and a half times more than they like comparably sized gains. And so, you know, the, the impediment to us as investors there is pretty obvious because it leads us to, to be pretty scared of losing our money and not nearly as excited when, when we made money, but I don't have to tell a financial professional that, you know, that very well. So those are kind of the, those are kind of the four.

Yeah, definitely loss is more painful than missing out on gains. And I'd much rather see an investor miss out on gains then, you know, have to experience painful, painful losses if they don't have to. And that's really about finding the right level of, of risk and, um, figuring out what the investor needs to be able to achieve their goals. But I, in, in thinking about this with women, since this podcast is, is focused on women professionals, you know, successful women professionals tend to be confident. I see, um, with my own clients, um, a lot of overconfidence, um, I really do so that's, that's interesting that you say that I don't see as much as they feel that they are lucky, but I, more than ever in my 20 plus year career in this industry, it seems like people are, are more convinced about what is going to happen next in the near future than ever before.

And I hear words coming out of my client's mouths that are sophisticated and they, they really, they really have no idea, right, what's coming, but these are, they're taking soundbites from what they hear in the media and they are repeating them and they are internalizing these ideas and then believing that they are, they're convinced that they're going to come to fruition and most of them are negative and fear-based and unsafe, you know, based on uncertainty. So what do you do? And then another thing with women is they, they do tend to think with their hearts more than their heads, or be led by their hearts more than think with their heads. So what can you do as a successful woman professional to kind of combat these natural tendencies that you talk about?

So I want to take, if it's cool with you, I'm going to take just a minute and talk about the behavioral tendencies of women as a group, because I think it's an interesting, it's an interesting study in investor behavior. So women as a group, the listeners will be pleased to know, uh, outperform men, pretty handily. So what's interesting is that women outperform men in both retail and professional contexts. So basically, um, you know, every day mom and pop, uh, female investors, outperform men, and this is also true of, of women hedge fund managers and, and mutual fund managers versus men. So why is it that women tend to outperform men in general? Well, there's a there's interesting reasons, right? Um, anything in psychology, the, the reasons are typically bio-psycho-social, so it's some combination of, of biology, you know, some combination of nature and nurture. So what's interesting about women is that women have, uh, just sort of a, a physiological advantage.

We know from research that testosterone makes you a bad investor that, uh, there's been studies of, of people on the floor of the stock exchange and traders that found when their testosterone reaches really elevated levels, they start to make risky and stupid decisions. So the fact that women have, uh, you know, markedly lower levels of testosterone than men, uh, gives them sort of a physiological advantage out of the gate then, uh, women are socialized to be, uh, you know, socialized by and large. Again, always speaking in generalities here, but by and large women are socialized to be less arrogant, um, sort of more circumspect, more thoughtful than men as a group. And you see this coming out, women weigh probability better than men. Uh, women diversify more than men. Women are more patient than men. They're less likely to sell it of a position. They hold their stocks longer, like on every single behavioral measure women out perform men and they do so pretty handily and that actually increases with age so that that outperformance increases with age.

Um, so there's a lot of reason to be excited. I think for women who are listening to this podcast, I think there's a lot of reasons to be optimistic. And what's neat is there has historically been this sort of confidence gap. Like the best kept secret in finance was that, uh, women were really, really good at managing money and really good at, at finances. And yet they didn't perceive themselves as being good and men didn't perceive them as being good. So I think it's important that we kind of start to tell a new story and that we start to get these, these data points out there in the world because women still fought for all their success. Um, in, in professional context, women still make up a pretty, a pretty paltry minority of professional fund managers. I think it's about 70, 30 men. And so I think it's important to kind of share some of these stats and start to tell that different story.

I love that. And I have seen some of that research, um, and it, it does make sense to me. I do feel that many women are more disciplined now they may share their emotions more. And I know as a, as a financial advisor, I hear it and I feel it, I feel when they are stressed and afraid and concern, but the difference is they don't tend to act on it as much. And maybe that is consistent with what you're saying is that we we've got this ability as women to kind of regulate ourselves, that we may be all over the place. I know I do this when making a big decision, I'm all over the place and thinking I'm going to do one thing. And then I end up doing the thing that I was thinking about all along. And it just, you go through these emotional gymnastics, but at the end of the day, you make a pretty disciplined decision. So it's interesting.

Yeah. So, you know, we're, I'm going to take you down every rabbit hole, Stephanie. So it's interesting. It's interesting because if you look at like a clinical psychologist, so women, women present to therapy, women attend therapy at about double the rate of men. Um, and so for a long time, it was sort of hypothesized that, that women are more emotional or, you know, women are, you know, w women are more sort of impulsive or emotional. This was sort of, I think the colloquial, like the popular understanding, the stereotypical understanding of women. Uh, but what's interesting is we know now that's not the case and that women going to therapy is not because they're emotional. It's because they're emotionally mature. And they're, you know, they're looking for something to do with those strong emotions. Men feel, uh, at least as as many emotions as women, right?

But men, again, speaking as a whole tend to channel those things into more destructive and self destructive behaviors, you know, you see levels of alcoholism and violence and other things among men that you don't typically see among women. So I don't, uh, I don't think there's much in the research to back up the notion that women are more emotional than men. And I do think there's some evidence to suggest that women may be as a group more emotionally mature than men. Um, so I think it's important, you know, to sort of de-stigmatize these things. I think it's important to, you know, just the same way that we seek out, um, you know, professional counselors for our, for our psychological ailments and for our emotional reactions there, I think the biggest, uh, value or, and a real sign of maturity when it comes to investments and finances is knowing when you need help and knowing, you know, when to ask for that help.

So, you know, hiring a financial advisor, working with a professional reading, a book, getting advice, that's not a sign of emotionality, that's a sign of, of maturity. And then, you know, the final thing is women are more, um, women are more interested in, uh, socially responsible type investments. As a group, women are more interested in values based and socially responsible type investments. And, you know, for a long time, I think wall street kind of looked at that as a, as sort of an emotional thing like, Oh, that's cute. They want to own the, you know, whatever the save, the whales, fonder, whatever. But what's interesting is that we're seeing that owning these socially responsible funds has real behavioral upside. So, you know, people, if, if you own a women's leadership fund or an environmental, you know, a, an environmental fond or whatever, that's personally meaningful to you, it's easier for you to hold on to that through a downturn than it is, you know, for you to hold onto the S and P 500, which you don't care about one way or the other it's kind of this impersonal thing. So I think a lot of the common criticisms that have led been levied at women historically about being more emotional or letting their emotions, uh, you know, impact the way that they invest. I actually think it's evidence of emotional maturity in some instances, and it has some behavioral upside to it. So

Really fascinating. Yeah. And I like what you're saying about socially responsible investing. I feel that that is coming up more and more. Um, but again, it's another thing where we are just scratching the surface. And I think the more women who learn about that opportunity, the more excited they, they will become about it. And, and as we know, it's really beginning to take off it's in terms of its its validity and also its popularity with investors and also financial advisors. I want to go back to, to what you said about hiring a financial advisor, because I've heard you talk about this before that people kind of think they're getting one thing, but they're really getting something else, especially when it is a seasoned financial advisor who has been through some difficult times over the years in terms of the economy and the markets we've learned, you know, what, what really matters and what really contributes to success over the long term. What, what are your thoughts on that?

Yeah, so you, uh, you put it well, um, people think when they're hiring a financial advisor that, you know, they're hiring the, the Warren buffet of Dallas, Texas, or, you know, wherever you live, right. They think, they think that they're hiring someone who has sort of the inside track to selecting hot investments that are going to generate high returns. And that, that will be the source of sort of, you know, their success. Like this is why I hired you because you have insights into what the markets are going to do that I don't. And while that may be true at the margins, I mean, certainly hopefully the average financial advisor knows more about markets than their clients do. All the research shows that the best value, the biggest value added by a financial advisor is that she is able to hold your hand and guide you and help you make decisions and help you keep your cool at a time when you might not have otherwise.

And so if that advisor can do that two or three times throughout, you know, throughout the course of your relationship with her, she has more than earned her key, right? This is adding enormous value. All the research points to the value of working with an advisor, being somewhere between two to 3% per year. Uh, and that doesn't sound like a big number, but when you, but when you think that an average portfolio, uh, you know, a diversified portfolio is gonna on average somewhere in the neighborhood of about 7% per year, over over long periods of time, uh, that 3% starts to look pretty good. Um, so yeah, most people think they're hiring a financial wizard or a stock picker. Uh, when what they're really hiring is a sort of financial life coach.

That's so true. And I love, um, I love your messaging around that. And it also means that as financial advisors, we've got to get better at this idea of life coaching. And I think it just borders serving, trying to serve as a therapist in some, in some ways, which we are not qualified to do obviously, but, you know, we can add clarity to all of the noise out there and provide leadership and handholding and guidance to keep people from making those disastrous decisions, decisions that can really wreck their retirement. And all of that is, is hard to get across. But I mean, I kind of view my job as really helping women focus on what they can control, all the news, all the noise, all the fear-based media out there. What are your thoughts on, on trying to keep that at Bay? Because you want to stay in touch with the news and you want to know what's going on. You know, a lot of us are glued to the television these days because of everything that's happened this year. And there's so much at stake, we have a presidential election coming up. How do you separate psychologically what you're taking in from whether or not that should impact you and your decision making, or do you just have to not consume news and information, or even misinformation that we see on various social media sites and blogs and these kinds of things.

Yeah. So it's a, it's a great question. So one of the truisms about human behavior is that willpower is exceedingly weak and that the best thing you can do to shape a behavior is to like never put yourself in a difficult situation, right? So this is why someone on a diet should not, you know, by double stuff, Oreos, and then just white knuckle their way through not eating them. They should just not bring them into the house. Right. This is why alcoholics go to bars like this is, you know, that that's sort of the principle like willpower is all well and good, but it's much easier to avoid the negative stimulus in the first place. So with respect to the news, I literally cannot think of a time when you know, something you would see on the evening news should inform short term decisions. You would make about say your retirement portfolio, right?

I mean, I literally cannot think of a time. And so there are, uh, there there's research into 19 different countries that shows that the more people mess with their portfolio. So the more that they, you know, tinker with or actively trade their portfolios, the worst that they do. And again, the, the, the research around women outperforming men that I talked about earlier, uh, shows that one of the biggest reasons why that's the case is because women trade less than men. You know, men are more overconfident as a group than women. And part of that overconfidence manifest itself as trading. So, you know, with respect to your question, if there's nothing you're ever going to see on the news, that's going to like spark you to, you know, make some great trade in your portfolio. And if on average with the news is going to try and do is scare the, you know, scare the heck out of you and make you want to do something with your portfolio.

Then I think it's often best to ignore the financial news. Now in, you know, in the age of COVID like I find myself at least back in March, you know, at least early on, you know, watching the news, which I nearly never do watching the news just to find out like, what is going on? Like, what is the, you know, what is this virus? And, you know, what's happening. So I, I watched the news to inform myself politically, like I watched the news to inform me about who I should vote for. I watched the news to inform me about the course of the virus and how to keep my family safe. But with respect to watching financial news, um, in the hopes of getting some sort of inside baseball about what to do next, it's basically a fool's errand. And I think you're better off watching something, you know, if not more entertaining, definitely more informative or useful.

Great advice back to this goal of retirement. You touched on it. And I talked about it a little bit, it's it really is the biggest goal for those of us in midlife that we're thinking about now, and still even getting closer, you know, say within five to 15 years from retirement, why is it so hard for us to imagine our future self and care about who we are going to be in the future with the same or similar needs? And, uh, why is it so hard to stay focused on that? Do you think?

Well, the, the psychological term for why it's hard is salience. So, you know, earlier I talked about this attention bias, which is the sharks and the selfies, right? Like why, even though we're five X more likely to die taking a selfie than swimming with a shark. Why are we, why are we more scared of the shark than the cell phone? It's cause it's more salient, right? It's easier to imagine it's more vivid. It's easier to imagine jaws coming than it is us, like, you know, falling in traffic or whatever. And then the same thing, the same thing is true of, of your future self. So, you know, today, Daniel, it's about three o'clock. So today Daniel is hungry, right? So this is, this is the time I get a little, a little hungry, right? So, you know, today me has all these needs, right? I'm hot, I'm cold, I'm hungry, I'm thirsty, you know, I'm bored, whatever, right?

Like my emotions right now are very salient. Like they're very real, they're very in your face. And it's, you know, of course it's very easy to imagine and very easy to understand the things that I want and need. Well, the truth is there's an 80 year old Daniel, that's going to want to eat, you know, it's going to want to eat and want to go on vacations and want to do fun things and want to splurge on the grandkids. But that old man, Dan seems distant, right? He's not very salient. And so there's actually research that shows they took an app. I think Merrill Lynch was the first one to do this. They took an app that progressed the age of people's faces. So you could kind of take a picture of your face and then age or face. And they found that people who went through this exercise were more apt to save for retirement than, than those who had not been through the exercise.

Wow. Because effectively what it does is it makes it salient. It says, Hey, 40 year old, Daniel, like you got some wrinkles today, one day you're going to have way more wrinkles and you're still going to want all the things you do today. So one of the things we can do is make this more salient. And for me, one of the main ways to make aging more salient is to spend time with loved ones who are, who are there, right? Like when I'm with my grandmother, like, what does she want? What does she need? What are her concerns? Because one day those will be my concerns. Uh, you know, they, they, aren't 40 year old Daniel's concerns, but they're there one day Daniel's concerns. And the more salient you can make that the more you can ponder it, the more you can reflect on it. But even more than that, the more time you can spend with people who are having those concerns today, the more real that will become to you.

That's so makes sense to me, with my, my parents who are in their late seventies, uh, I don't know what it is about turning 50, but all of a sudden you do become more aware of that. They are aging and their needs are changing and they are slowing down a bit. Um, I, I pay a lot more attention to that now, because as you say, it's salient, it's in my face. I see it. My parents live 20 minutes away from me, so interesting. But I am just shocked about that app. I don't know if I want to see myself at 80 at this point.

I did. I, I, sadly I did it and it was a horror show. I wish I had known I was already saving for retirement. It just made me depressed. So I wouldn't, I wouldn't recommend it.

Honestly. I think I remember seeing that app and I was like, Oh no, heck

I don't want to know wasn't good for me.

It is, it is difficult to imagine, you know, if you're retiring in 20, 30 years, that's one reason why, you know, automation is so important, just continuing to do the right things, the right financial actions that are going to help you sustain yourself to and through retirement because let's face it. Women are living longer. We're living healthier lives. We've got healthcare is, uh, is a huge issue and a huge expense later in life. There's been research on that and I've talked about it on this podcast as well. Um, but it's just so important to, to stay focused on that goal, even though it, it, it, I try to get my clients to think about, you know, all of this doesn't end, when you hit retirement on the day you decide you're done working, then you still have to remain vigilant and disciplined and focused because you, you don't want to outlive your assets over the 20, 30, 40 years you might be spending in retirement. It's, it's like a, a job or a focus that, that can't really ever end.

Yeah. And you know what we're, what we're seeing about retirement too, is there's strong, of course, psychological components to it too, because work serves a number of psychological functions that we don't commonly consider. I mean, we commonly think about work as a paycheck, you know, with respect to retirement, but, you know, work is also, you know, meaning it's also engagement. It's also a source of friendship and laughter and you know, uh, self worth. And so when, when people plan for retirement, you know, one of things that an advisor can do is of course help them get their financial house in order first and foremost. But it's also, I think, wise to consider what will take the place of work with respect to your engagement and your relationships and your sense of meaning and self worth. So there's a lot of, uh, work scratches, a lot of itches. I mean, as much as we like to bag on work, um, you know, work, uh, scratches, a lot of psychological ages that, uh, that are tough in retirement. If you're not, if you're not planful and purposeful in how you go about it.

Yeah. I'm such a huge advocate of, of having, uh, working as long as you can and, or having a work optional mentality when you retire. Um, and what I see a lot of is women, especially, you know, women professionals with big careers, they are they're over it. You know, they are burned out. They're exhausted when they hit 60 and they want to retire. And it's really, for most people, it's too young. You know, the, their, their nest egg is not going to produce the kind of mid six figure income. They are accustomed to earning. And so it also work keeps you active and engaged, and it's part of your social community in many ways, your peers. So I'm a huge fan. And in fact, my dad is an owner of a little mom and pop health store, and he is 76 years old. And he started this store.

He retired early at 50, got extremely bored, started day trading stocks had a pretty bad experience doing that and decided I'm going to go crazy. I can't play golf all day. This is, this is really boring. I have no purpose. And he started a health store and now 25 plus years later, it's extremely successful. Everybody in town knows him. And so that is what I have seen. That's been my experience and I, I vow to do the same. And so I talk about that a lot. It's not for everybody. Um, but I think some of these women get stuck on, I do want to work, I do want to do something. I do want to stay active and engaged, but I don't want to do this taxing career that is killing me, but then they don't know what to do. And I think that's an area for exploration and there's not a lot of, of information at least that I have found about that, of what do you, what do you do next? What are your options? So that's a gap that I see.

Yeah. I, um, I think that's a great, a great way to think about it. And I think, uh, we'll, we'll, I, and the, of the listeners of the podcast will challenge you to figure that one out on our behalf. How's that? So I think in my spare time between being Taylor Swift and, uh, and, and being a financial professional. Yeah. Because I think, um, I think you're exactly right. And what's complicated. You, you know, you think about a big career, right? I mean, there have been times in my career, one of the things that I've enjoyed about this year, there's precious few things to like about this year. But one of the things that I have have really liked about this year is that I haven't been traveling much and, you know, I've traveled for my whole career. And like there have been times that I was very, very over like that element of, of my career, but I wasn't over, you know, meeting interesting people. I wasn't over a paycheck. I wasn't over, you know, thinking big ideas and having a level of notoriety and, you know, a host of other things that it was doing for me. So it, you have to kind of compartmentalize it and figure out a way to get the best parts of that career, uh, without the sort of soul sucking parts. And I do think it's a, you know, it sorta takes a scalpel and it takes a guide to help you think through that.

I love it. And I'm thinking, you know, if, if business travel is never the same or if it changes drastically because of COVID that for many folks like yourself who have big and successful careers and travel all the time, or did travel all the time, maybe that career becomes much more fulfilling because you can do so much more from your desk and virtually, and spend the time with your family and have life balance. And I think that's, that's a big part of it that these women are sacrificing in all of those areas for the career. And then they're, they're getting to 60 and going, my God, I don't have that much time left. I want to live my life. You know, I want to do other things. And so that's, maybe, maybe that's part of the answer is that's a way to, to have the paycheck and have the connections and the, the engagement, but not have to travel all over the country or all over the world for your job.

So I got another, I got another rabbit hole for you. So there's this concept in psychology known as an existential boundary experience. So like, um, basically if you've ever been, you know, I think for myself times I've had like a near miss car accident or something, or times, you know, when someone close to you is had a health scare or has passed away, there are moments of lucidity that you get in these existential boundary experiences. You know, you have this moment, you know, it's like, okay, my friend got cancer. And so like, you have this moment of clarity about what in your life is important and what in your life is not important. Like, you know, when, when everything is sort of on the line, everything comes into sharp focus. But then if you don't, if you don't write those things down, if you don't act on those things, life resumed, and we're quickly back in the rat race and those, those sort of insights are forgotten.

So one thing about 2020, it has been such a year, right. It's been such a year and there's been so much shakeup that I think we've gotten, we've had some real existential boundary experiences. Like we've, we've had some opportunities to look at the world of work, uh, you know, our family lives, whatever else it may be and go, you know, here's some stuff I like about this and here's some stuff I don't like. And, you know, I don't think everything needs to come back. Like, you know, I don't think everything needs to go back to normal. There's, you know, I want, I want hugs back. Like I want, I want to give some hugs in 2021. I'm hoping, but you know, not everything, not everything needs to come back. And so I think this year is a time to be intentional about your life and your career and say, what do I want to keep? And like, what do I want to let go?

That's such great advice. It really is. And I'm glad that, that you touched on this. I think that the women listening to this podcast will really, really relate to that. All right. Well, let's wrap up, I've got one more thing I want you to talk about with us, and that is you share this concept of celebrating the wins along the way. Saving for retirement is hard. As you've said, investing is hard and difficult. And why is it important? And what do you mean by celebrating the wins along the way?

So you're ex you're exactly right. Um, you're exactly right. That all of the things we ask our clients to do are enormously psychologically difficult, right? So, um, we, we, as a human race, hate uncertainty and we tell them like, Hey, put your money in markets and it's going to go up and down, right? Like that's hard for people. We, as a human race are very rooted in the here and now versus the future. And we say, Hey, you know, give this money, you know, put this money aside for the 40 years from you now it's very, very hard. And so the only way that we're going to get there is to find some joy in that journey. And I think we have to learn to celebrate small victories. Uh, and it's just not binary. Cause one of the things that we know about, uh, human behavior, is there something called the hedonic treadmill?

So the hedonic treadmill means we need basically more and more stuff or like more and more money to keep up with the same level of previous enjoyment, right? Like once you've set a goal to save a hundred thousand dollars and you hit it like, cool, you've hit it. Like now what's next next. And you, you know, the treadmill gets going a little bit faster now it's, you know, 500,000, then it's a million and you really never quite get there. And so one of the things that we have to learn to do is celebrate the journeys along the way, because you're never a, you know, for most people, it's never going to feel like enough. You're never going to feel wealthy, even if you are. Uh, and so you just have to learn to enjoy the journey along the way. That's going to be the surest way to, to make sure that you get there and also to make sure that you get there in style, right? I'm, I'm always a little sad when I see people who are kind of just throwing away today, you know, for retirement, like we, as a country need to sacrifice more. We need to save more, but there's a certain brand of people who give up so much today, uh, to, to save for that future, that they're not even enjoying the moment. So learning to strike that balance, I think is incredibly important.

I could not agree more with that. And, you know, I went through a career experience myself, where I worked with the large brokerage firms as a financial advisor for the first 15 years of my career. And I was in management with Merrill Lynch actually in the, during the 2008, 2009. Great recession that came about, and my management position was basically eliminated. I didn't have the same number of clients that I had previously, as you climb the ladder, you know, they ask you to give up your clients along the way. And so I had to make the decision to leave. Um, I could've stayed, but I just, I didn't, for other reasons, it just was not the right path for me. And so I was able to step away from the rat race and take some time off, take what I would call a sabbatical. And it just allowed me to reflect on the past accomplishments and failures.

And it allowed me to really explore what my passions are, were, and are still today. And it allowed me to celebrate along the way and then really kind of figure out what was next. And I just having lived that I feel the same way. I got a really nice taste of what life balance is all about. And so I do agree with you completely, that you have to, it is a balancing act you have to live for today, but also do enough to take care of yourself in the future, but not so much that you don't, you miss out on everything today, you miss out on, on your life.

W and the, the great part about what you just said. And I agree with all of it is that the important thing to understand is that most of us err, on one side or another of that equation, right? Most, most of us are either a little bit too much fun in the moment or a little bit too stuffy about saving, saving for tomorrow. Right. So both are important. And just understanding yourself enough to know sort of where you lean is an important first, first step in that process.

Awesome. All right, Daniel, where can people find you online?

Uh, so I'm on Twitter at Daniel Crosby. I'm very active on LinkedIn, uh, Daniel, Crosby, PhD, and yeah, find me there.

Okay, great. Well, I'm going to put some links in the show notes to make that easy for lists.

Well, thank you again for having me. It was a blast. All right. Thank you so much. Take care. Alright, you too.

Show is for informational and educational purposes only. Please do not consider any of the content as personalized financial investment tax or legal


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