Episode summary
Stocks Keep Making New Highs. Index Funds Won. So Why Is Daniel Crosby Worried About Sports Betting?
Excess Returns
· · 50 min · Hosts: Matt Zeigler · Guests: Daniel Crosby
Summary
Daniel Crosby argues that the hardest part of investing is not picking a good portfolio but holding it through real-world emotion. He contrasts “spreadsheet optimal” portfolios with “behavioral optimal” ones, using the example of a focused equity fund that returned about 18.5% annually for a decade while many investors still lost money by buying and selling at the wrong times. His framing centers on anxiety-adjusted returns: the best portfolio is the one a client can actually stick with.
He lays out three simultaneous goals investors have: avoid ruin, meet day-to-day needs, and still have a shot at outsized success. That leads to his safety, stability, and success buckets. Safety is meant to keep people from panicking in crises, stability uses diversified assets that zig when others zag, and success is a rules-based, automated, differentiated portfolio built to outperform without relying on discretion.
Crosby is sharply worried about sports betting, prediction markets, and social-media-driven trading habits because they blur the line between investing and gambling. He says recent market experience, easy apps, and a culture of “buy the dip” can create unrealistic expectations. His prescription is education, environment, and encouragement, plus more human advice as AI automates lower-value tasks.
Key takeaways
- Daniel Crosby says a portfolio is only “optimal” if the investor can actually hold it through stress and temptation.
- He cites a fund that compounded at 18.5% a year for 10 years while the average investor still lost money because of bad timing.
- Crosby’s safety, stability, and success buckets are designed to match different human needs: survival, spending, and aspiration.
- He argues risk tolerance, risk capacity, and risk composure are distinct, and composure is what breaks plans during drawdowns.
- Crosby sees sports betting and prediction markets as making investing feel more like gambling, especially for younger investors.
- He says AI can help advisors automate routine work, but the highest-value part of advice remains human connection.
Notable quotes
“whether or not a portfolio is optimal depends on who's holding it”
“we all want to invest in something that's going to give us 18.5% a year. That sounds incredible”
“the best predictor of that, best predictor of whether or not a client listens to that from you is how much they like you”
“if you're excited about something, if you feel like something's can't miss, you you probably missed something”
How the episode opens
You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use for better questions lead to better decisions. It's my honor to have this guest back to talk about the updated version of his new book and much more. The behavioral investor known to some as the end outcome the wolves of behavioral finance because my guy here is operating at an Ivy League level.
The behavioral investor new edition is out now. Pick it up. Pick it up.
Welcome back to Access Returns. Dr. Daniel Crosby got an OP Ivy reference and a pick it up.
Pick it up. Incredible words. This is why I come on the show.
Great to be here.
You are setting the baseline in the most Matt Freeman of ways. What can I say? My heart is full. — It just doesn't stop. — I mean, I I will stop only because we'll be in trouble real fast. Congratulations. You did the updated version of the book. That's a cool thing to do. Did you think you were going to do this when you wrote the book originally?
It was. So, it's funny how it happened. Um, little inside baseball here.
The original uh 2018 version of the book is hard cover only at my own insistence because I have a pathological commitment to hardcover books. Uh, in my personal life, I only buy hardcover books. My thought is if it's worth having, it's worth having in a more permanent uh way.
And I am committed to this idea in a way I'm committed to few others. And so I forced that commitment upon my publisher, Haramman House. They indulged me uh for many years, but then they reminded me that paperback books sell better, they're cheaper, they're lighter, and they take up less room on the shelves.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- winning fund vs investor returns
- risk tolerance capacity and composure
- stability and success portfolio buckets
- investing vs gambling and prediction markets
- ai and behavioral finance
Companies and tickers mentioned
- Orion Behavioral Finance
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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