No doubt behavioral finance deserves attention in the investment decision making process as this discussion about the dangers of group think. However, it can be carried too far by the individual investor. Take Gerd Gigerenzer’s argument, in his book recommended above, that because forecasting accuracy of financial experts is miserable, the equal allocation (1/N) rule be employed. Gigerenzer uses the oft repeated behavioral example of Markowitz splitting stocks and bonds 50/50 in his retirement account to avoid regret. Turns out that the father of Modern Portfolio Theory now splits his money among asset classes with risk, return, and portfolio efficiency in mind. I wrote a post about this: Diversifying Your 401(k) / 403(b): Don’t Make Fund Allocations Equal Applied to a 401(k).