Barber and Odean (Journal of Finance) find that households who trade more have a lower net return than other households. They argue that these results cannot emerge from a model with rational traders and instead attribute these findings to overconfidence. In contrast, we find that household financial choices generated from a dynamic optimization problem with rational agents and portfolio adjustment costs can produce trading and return patterns that closely mimic these facts. Various forms of irrationality, modelled as beliefs about income and return processes that are not data based, do not improve the ability of the model to explain turnover and net returns patterns.