Dr. Daniel Crosby on Behaviorally Optimal Portfolios, Risk Composure and the Casino Myth

<p>Daniel Crosby explains why investors can lose money in winning funds and how to build a portfolio they can actually hold. Picking the right investment is only part of the challenge; staying with it through discomfort is where behavior can overwhelm the plan.</p><p><br /></p><p>In this episode of Excess Returns, psychologist and Orion Chief Behavioral Officer Daniel Crosby joins Matt Zeigler to discuss the new paperback edition of The Behavioral Investor. Daniel shares the story of a fund that returned over 18% annually for a decade while its average investor lost money, then explains how safety, stability, and success portfolios can help align investment decisions with human psychology. They also explore gambling apps, the limits of risk questionnaires, social media feedback loops, and the human side of financial advice in an AI-driven world.</p><p><br /></p><p>Topics covered:</p><p>- Why a fund's returns can look very different from the returns its investors earn</p><p>- Building safety, stability, and success buckets around different financial needs</p><p>- The differences between risk tolerance, risk capacity, and risk composure</p><p>- Why knowing what to do does not guarantee doing it during a drawdown</p><p>- Daniel Crosby's case for rules, diversification, and meaningful benchmark differences</p><p>- How sports betting and prediction markets blur the distinction between investing and gambling</p><p>- Why recent market experience can create unrealistic expectations about future returns</p><p>- Education, environment, and encouragement as tools for changing investor behavior</p><p>- How algorithms reinforce market biases and why excitement can signal a blind spot</p><p>- Where AI can free financial advisors to spend more time on human relationships</p><p>The Behavioral Investor - paperback edition:https://link.amazon/B00hgkHGG</p><p>Daniel Crosby on X:</p><p>https://x.com/danielcrosby</p><p><br /></p><p>Orion Behavioral Finance:</p><p>https://orion.com/behavioral-finance</p><p><br /></p><p>Research discussed:</p><p>The heat of the moment: the effect of sexual arousal on sexual decision making</p><p>https://onlinelibrary.wiley.com/doi/abs/10.1002/bdm.501</p><p><br /></p><p>Chapters:</p><p>00:00 Daniel Crosby and The Behavioral Investor</p><p>04:51 Why winning funds can have losing investors</p><p>11:46 Risk tolerance, capacity, and composure</p><p>17:38 Stability portfolios and rules-based stock selection</p><p>23:06 Investing, gambling, and predict