Unit 1 · Level 4 · The behavior gap
The gap in euros
A 1-2% yearly gap sounds like rounding error. Compounded over a working life, it isn't. Remember the rule of 72: money at 7.2% doubles every 10 years, but at 4.8% it needs about 15 years per double. Over 30 years that's three doublings versus two, and the difference is paid in real euros, not percentages.
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What you get asked
You invest €10,000 for 30 years. Held calmly at 7.2%/yr it doubles every 10 years → €80,000. With a behavior gap dragging you to 4.8%/yr it doubles every 15 years → €40,000. How many euros did the gap cost you?
€80,000 − €40,000 = €40,000: the gap ate half the final pot. A 'small' 2.4%/yr leak, compounded for 30 years, cost more than the original investment four times over.
Order the journey of €10,000 compounding at 7.2% per year
Notice the last doubling added €40,000, as much as the first two combined. Every panic-sell risks restarting the clock on the biggest doubling of all.
Rule of 72: at 7.2% a year, money doubles roughly every ___ years.
72 ÷ 7.2 = 10. The same rule from League 1 that measured inflation's damage now measures what your patience earns.
What's the most reliable tool for closing the behavior gap?
The gap is caused by decisions, so remove the decisions. A standing order buys through euphoria and panic alike, no willpower required.
Deepest lesson of this unit: where does the behavior gap actually live?
Volatility is the market's job; reacting to it is optional. Skip the reaction and the fund's return becomes YOUR return. 🐜
The rest of this unit
Funds do fine; their investors do worse. Close the gap between you and your own money.