Episode 260: Prof. James Choi: Practical Finance

<p>Today we welcome James Choi, Professor of Finance at the Yale School of Management, to the show to share some of his insight into what he has dubbed practical finance. James has focused his research on behavioural finance, behavioural economics, household finance, capital markets, health economics, and sociology, and is turning this expertise into pragmatic knowledge marketed towards ordinary people. This reframing and reconfiguration of the theory for all people and the decisions they make, could not be more in line with what we are trying to do here at Rational Reminder, and this conversation with James was packed with so many surprising and informative responses to relatable questions. We ask James about index funds, the benefits of advisors, optimal equity, diversification, and much more. We also spend a little bit of time exploring the individual reasons that people have for their decisions, with James expanding on the disconnect between people's philosophy and their actions. Further topics include the role and impact of education, renting versus buying, and the formulation of his concept of practical finance, so make sure to join us and catch it all.</p> <p> </p> <p><strong>Key Points From This Episode:</strong></p> <p> </p> <ul> <li>The failure of economic theory to explain everyday financial decisions. <strong>(0:03:03)</strong></li> <li>A little about James' course on personal finance at Yale. <strong>(0:06:29)</strong></li> <li>Economic theory and popular personal finance advice on optimal savings and consumption. <strong>(0:12:06)</strong></li> <li>Looking at economic theory and popular personal finance's suggestions about optimal equity allocations for households. <strong>(0:19:33)</strong></li> <li>The kinds of personal aversions people have towards their finances. <strong>(0:27:07)</strong></li> <li>The impact that James<strong>'</strong> survey research has had on his perspectives on equity. <strong>(0:29:42)</strong></li> <li>Practical application of economic theory to household decisions. <str