Classical economic theory is built on the idea that people make rational decisions to maximize their utility. In theory, investors analyze data, weigh risks, and make consistent choices based on logic and long-term planning. But in practice? Emotions, limited knowledge, and past experiences often drive decision-making far more than spreadsheets or forecasts. This disconnect is what economists call bounded rationality. Bounded rationality recognizes that while people aim to be rational, their decisions are limited – or bounded – by the information they have, the time they’re willing to spend analyzing it, and the mental shortcuts they rely on. In the world of investing, this can lead to decisions that feel right in the moment but are ultimately flawed or counterproductive. Take the example of Ricky, an investor who tells his financial planner that he’s comfortable going “all-in” on the stock market to build wealth. On the surface, he seems like a risk-tolerant investor – confident and focused on long-term gains. But when the conversation turns to the 2008 market crash, Ricky’s perspective shifts. He recounts how his former advisor told him to stay invested during