Daniel Egan is currently in charge of Behavioral Science and Investing at Betterment, where he integrates behavioral finance and passive investment management to help customers achieve their goals. He evolved from Behavioral Finance Specialist to the Director of Behavior Science and Investing. He researches into what drives, and how to prevent harmful financial behavior. This includes how to increase savings behavior, reduce speculation and increase planning by them more effectively powerful.
Daniel holds a Master of Science degree in Decision Science from the London School of Economics and BA (Distinction) in Economics from Boston University.
Daniel enjoys speaking to academic classes and industry conferences, and do it often.
In this episode, Daniel shares his worst investment story venturing in a double leverage Oil ETF that cost much more than his lost investment money but the value of his greatest assets---time and confidence.
“Always be aware that your time and your attention is a really valuable commodity.”
– Daniel Egan
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Resources:
Topics Covered:
00:43 – Dan’s professional and behavioral finance background
03:09 – Circumstances leading up to his worst investment ever: green shoots appearing from the oil industry during the financial crisis, big reserves of oil people that were kept offshore
04:02 – a double leverage Oil ETF called DXO, a vehicle to express Dan’s view that oil was going to be going up as things got better.
04:31 – A speculative play to take at least six months if not a year.
05:09 – Dan’s applying the things he knew from his behavioral finance background
05:25 – The lessons Dan learned from his investment experience
07:25 – Deutsche Bank backing out their sponsorship to DXO, they decided that it was way too much risk on their books
08:28 – Andrew’s takeaways from Dan’s experience
12:29 – Diversifying instruments versus the diversification benefit
13:35 – Dan’s actionable advice: Keep it simple.
Main Takeaways
Lesson 1: Be honest about position sizing versus cost. So you can have a great idea but you have to have a big enough margin that you're going to cover your transaction costs be it just commissions or taxes afterward.”– Daniel Egan
Lesson 2: “You got to take into account how much it's going to cost you in indigestion, sleepless nights and how much it's going to take away from you spending time on your real job.”– Daniel Egan
Lesson 3: “You have to really understand what you invest in. What I missed out on or with the cost that I didn't see was my time. I could have been doing something much more productive for a kind of like my earnings potential or my life at that point in time. I actually view it as like a pretty serious loss because I just like had an opportunity cost that was hidden.”– Daniel Egan
Lesson 4: “You really have to think about the complete costs of an investment. And I think people often really overlook that there is you know we've already heard about the costs of the actual transaction. We've heard about the costs of taxes. We've also there's the cost of time and there's the cost of confidence.”– Andrew Stotz
Lesson 5: “Research what instrument are you investing in. There's a difference between having an idea and the instrument you use to execute that idea. Separate your idea from the instrument and study that instrument.”– Andrew Stotz
You can also check out Andrew’s books
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