There’s a field of economic research — behavioral economics — where psychology plays a major role in developing ideas about how and why people behave the way they do. We’re gaining some fascinating insights into how people act in ways that upend our beliefs of human rationality.

I’ll give you a couple of examples of how our behavioral tendencies cause us to act irrationally, even in the realm of finance, and offer up a couple of suggestions for how to overcome our inherent rational shortcomings.

A common example of a behavioral bias is people’s tendency for overconfidence.

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