In May of 2015, I gave at talk at the MIT Fintech Conference about our work at Betterment using unprecedented data on investor behavior to close the "Behavior Gap".
My main points were
- Betterment is a novel platform to measure, understand, and influence retail investor behavior
- Maximizing investor returns has to include returns net of taxes, fees, and behavior
- Investors try to time the market, but the more they change their portfolio allocation, the worse they perform, on average
- Experimental evidence in production shows that Betterment's Tax Impact Preview feature can reduce allocation changes, thus improving returns
- Investors have a bias towards active management
- Investors have a bias against taxes
- Making the taxes incurred by actively managing more salient drives improved behavior
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