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Matt Digges wholesales a number of interesting RBS offerings that work at mimicking oil, gold or the S&P 500 when things are good and mostly have the objective of moving to cash when things are bad. He recently introduced me to “The Behavior Gap,” a wonderful read that may change your practice and even moderate the way you think about investing.

The book is written by Carl Richards, a Utah-based certified financial planner who is often a guest on NPR’s Marketplace Money. Carl’s genius is summed up by Barry Ritholtz, “Carl has a wicked way with a Sharpie.” That may be an understatement. Carl gets across sophisticated concepts in simple drawings. He also is a thinker. Here’s Carl on feelings:

You need to be emotionally prepared for the times when your faith in your perfectly sound, reality-based decisions will be tested. And of course, this applies to every investment decision — not just the decision to sell or not to sell. 

Meanwhile, let’s not make all this seem harder than it is. Making the decision to sell or hold an investment is relatively simple when we’re aware of the cognitive traps of fear and greed. It should be clear to anyone that if you own an investment that has tripled in price, and you made that investment based on luck, it would be wise to take the profit and invest it in something that more accurately reflects your plan. 

I’ll be reviewing “The Behavior Gap” in an upcoming The Investment Edge column. Even so, I am so delighted with the book (“The Behavior Gap — Simple Ways to Stop Doing Dumb Things with Money,” by Carl Richards [Penguin, 2012]) that I thought you might like to either visit your bookseller or click and pay online. Carl is not only a great financial artist (maybe a new term), but he also has a great way with words and concepts.  

Have a great week and keep it simple for your financial planning customers, okay?

 

For more from Richard Hoe, see:

Motion

Tacticality

Speed Dating for Financial Planning?