Anyone who has shopped for groceries with a toddler knows to be on high alert for the impulse items the store has thoughtfully placed at a child’s eye height. And these days, grown-ups investing using web platforms or mobile investment apps must also be on high alert for carefully placed virtual nudges that might encourage impulsive trades.
A growing body of research has found that many seemingly innocuous design decisions embedded in investment apps or websites — such as replacing checkboxes with swipes or highlighting lists of stocks that have had the biggest price moves — can encourage investors to trade more. That can generate profits for the brokerage, but research has long shown that it can also reduce investors’ long-term returns.
