Calculated Risk: Shiller on 401K Plan Investing.

Behavioral Finance

Shiller gives his thoughts on the the behavior of savers regarding their 401Ks. I’m pretty sure he’s on to something really big and ugly. In the short-term, these “low cost” pension alternatives seem like a boon for the public and the institutions that peddle them. I suspect that this is one of those things, where the long term (30-ish years) will show that they’re about as valuable to civilization as smoking and asbestos insulation.

Behavioral finance refers to the model of activity based on human nature and the heuristic way in which people make their actual financial choices. As part of behavioral economics, it is beginning to be an alternative to the assumptions of there being an efficient market.

Shiller Who?

Shiller refers to the noted economist Robert J. Shiller, who among other things, is responsible for the Case-Shiller Index of residential real estate prices.

Thanks to Bill McBride and Calculated Risk Blog