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Smart Shortcuts for the Good-Enough Investor

Time is limited and information overwhelming. Shortcuts and rules of thumb can help in life--and investing.

It’s a fly ball heading your way. Do you do calculus to find out where it will land? Of course not. You fix your eyes on the ball and run. If you adjust your running speed so that the ball stays in the same place in your field of vision, then you and the ball will meet in the same place at the same time.

Lots of choices in life are like this. We either don’t have the time or we don’t have the information available to make a decision that is exactly right, so we rely on rules of thumb or mental shortcuts to get the job done. In short: Shortcuts work.