NGPF Podcast: Tim Talks To Berkeley Professor Terrance Odean About How To Be A Better Investor
I had a great conversation recently with Terry Odean, the Rudd Family Foundation Professor of Finance at the Haas School of Business at UC-Berkeley. You will walk away with some great ideas not only how to teach investing but also how you can be a better investor. Terry shares his “big break” that came from his dogged persistence to get access to a researcher’s crown jewels: brokerage account records for tens of thousands of individual investors. This data set would serve as the source for many of his research papers which provide critical insights on actual investor behavior and strategies on how we can outsmart our worst enemy when it comes to investing, ourselves. Terry also describes how his mentor, Nobel Prize winner Daniel Kahneman, influenced the arc of his career and his research interests.
Here are a few of the other questions that Terry tackles:
- What are the biggest mistakes that individual investors make?
- What is your take on stock market games played in high schools throughout the country?
- What are the three core concepts that should be in every investing unit?
- 0:00~1:34 – Introduction
- 1:34~4:17 – Terry’s unique background
- 4:17~7:28 – Daniel Kahneman’s influence on Terry’s career
- 7:28~10:25 – Describes the differences between System 1 and system 2 thinking
- 10:25~23:10 – How Terry started to do research on individual investors what he discovered
- 23:10~25:37 – Terry’s take on stock market games
- 25:37~29:48 – How Terry uses his research to inform his teaching
- 29:48~32:47 – Warnings about financial advisors and their fees
- 32:47~34:34 – How to burst overconfidence of young investors
- 34:34~37:25 – Three core concepts to teach investing
- 37:25~41:15 – Terry’s online course
- 41:15~43:14 – Resources and websites that Terry monitors
- 43:14~44:11 – Conclusion
- Thinking, Fast and Slow (A book by Daniel Kahneman discussed in podcast)
- Research paper: Trading is Hazardous to Your Health
- Hub for academic research: SSRN Financial Literacy
- Consumer Financial Protection Bureau
- Professor Odean’s webpage at UC-Berkeley
- Professor Odean’s YouTube channel with several personal finance videos
- “You invest so someday you have the money to do something you find exciting; you don’t invest for excitement”
- “You know what financial advisors do every day? They’re calling up clients and talking to clients. You know what hedge fund managers do every day? They’re trying to beat the market!
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.