Your Brain Is Stealing $245,000 From Your Retirement (Here's How to Stop It)

11 snips

Dec 15, 2025

This discussion dives deep into the fascinating world of behavioral economics and how our minds sabotage our investments. Overconfidence can lead to costly trading, while recency bias makes us think recent trends will always continue. Listeners learn about the endowment effect, which causes us to overvalue what we own, and how loss aversion clouds our judgment during market volatility. The episode wraps up with practical solutions to defend against these biases, emphasizing the importance of a disciplined investment strategy.

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INSIGHT

Behavioral Costs Outweigh Fees

Dalbar found average investors earned ~3% less annually than the S&P over 20 years, costing about $245,000 on $100k.
The performance gap exists even with low-cost index funds, showing the problem is investor behavior.

INSIGHT

Humans Are Predictably Irrational

Kahneman and Tversky showed humans are predictably and systematically irrational.
Behavioral economics explains repeated investment mistakes that rational models missed.

ADVICE

Capture Markets, Limit Stock Bets

Avoid frequent trading and stock-picking; use low-cost index funds to capture market returns.
Limit individual-stock bets to a small entertainment portion, like 5% of your portfolio.

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Most people don’t lose money because they pick terrible investments. They lose money because they’re human.

In Part 1 of this two-part series on behavioral economics, Tyler walks through the five most common psychological biases that quietly, systematically sabotage investment returns — even when you’re invested in low-cost index funds and “doing everything right.”

This episode is about the stuff that happens between your ears. The mental shortcuts. The overreactions. The stories we tell ourselves after the fact.

In this episode, we cover:

Why overconfidence makes investors trade more and earn less
How recency bias convinces us that whatever just happened will keep happening
Why we overvalue the investments we already own (even when we shouldn’t)
How loss aversion turns normal market volatility into bad decisions
Why hindsight bias makes the past feel obvious and the future feel predictable (it isn’t)

This isn’t about being smarter than the market. It’s about building systems that protect you from your own instincts — automation, diversification, fewer decisions, and a little less checking.

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