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Some simple investor advice: Don’t follow your gut

Finance, Policy, Psychology, choice, investments, risk

Cass Sunstein, the Harvard law professor who brought the latest in behavioural economics research to the ambitious task of improving and simplifying a host of U.S. regulations during President Barack Obama’s first term, has some simple advice for investors: Don’t follow your instincts or intuition.

“If you’re deciding how to invest your savings, your gut may speak clearly and simply. Please ignore it,” Prof. Sunstein writes in his latest book, Simpler: The Future of Government.

It is only one of the all-too-human tendencies that can lead investors down dangerous paths, particularly when the siren song of an impressive equity rally beckons.

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