At first glance, the gap between finance theory and the advice typically offered to ordinary investors seems wide. The rules of sound investing, as laid down by most advisers (salesmen) working for banks, insurance companies and the rest, or by personal-finance pundits in the media, suggest that these experts have been too busy to open chapter one of any post-1950s finance-theory textbook. Good news: it may not matter. The advisers' common sense has more going for it than you might imagine. It turns out that more advanced theories―which few economists, never mind investment advisers, have bothered to understand―endorse some of the salesmen's favourite rules of thumb, albeit for reasons unsuspected in head office.
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