Investment decision paralysis – how to overcome an overload of choices

Investment decision paralysis occurs when we are faced with so many investment options that we struggle to compare – but what can we do to overcome it?

In 2002, there were around 30,000 managed investment products to choose from. Over the next two decades, however, the number of choices has grown exponentially to more than 742,000 products recorded last year.

The increase ranges from open-ended mutual funds to exchange-traded funds (ETFs), but how can you navigate such a saturated market with a selection that will only continue to expand?

The road to a million choices

It has been projected that there could be a million managed investment products to choose from by 2031, and this abundance of choice can make it very difficult to commit to a particular course of action for your investments.

Today, investors are exposed to more information than any previous generation. Data and research that has only been available to financial professionals is now freely accessible, and this inevitably brings advice and news from sources that might not be qualified to serve the interests of your finances.

This deluge of information, while offering greater transparency, does not necessarily provide greater knowledge and understanding. More likely, it gives us a sense of uncertainty about what information can be trusted and relied upon.

Even through traditional and trusted sources, studies show that the growing access to technology only increases the need for assessment by a specialist who can see through the noise and direct your funds successfully towards achieving your objectives.

What is decision paralysis for investments?

People like to have choices; indeed, it is the bedrock of our autonomy and freedom. However, we tend to become overwhelmed by too many options, leaving us incapable of choosing at all.

Having ‘Choice Overload’, or ‘The Paradox of Choice’ as described by author Barry Schwartz, most often reveals that having too many selections to choose from actually limits our freedom to do so. Making a decision can be difficult, and making an important decision based on a seemingly limitless list of options is harder still – perhaps too hard.

When it comes to investing, having too much choice will most likely hurt you rather than help you if you don’t have the proper expert guidance.

Overcoming decision paralysis

Having noted that people now have access to more investment products and advice than previous generations, it may be surprising to learn that many people feel uncomfortable making investment decisions due to a general lack of knowledge.

A common cause may be the saturation of advice and information from unqualified sources. According to data released by Visual Capitalist, almost 70% of individuals who invest without the help of a financial adviser do not perceive any value in engaging their services. However, 90% of people working with a financial adviser find great value in following the guidance they offer.

This reveals that investors who rely on alternative sources don’t understand the value of financial advice until they experience it.

A financial adviser will help you combat decision paralysis by providing actionable insights and options based on your unique circumstances and objectives. Your adviser will be able to provide you with clear pros and cons of each option and help you to navigate the increasingly complex marketplace.

Make informed decisions with the right advice

You have worked hard for your money, and having some set aside to invest, you don’t want to be faced with a vast amount of investment options, where the research only seems to lead you further down the rabbit hole. This can be described as analysis paralysis, ultimately leading to decision paralysis. A situation where the sheer volume of options available prevents us from being able to make an informed decision in fear of choosing the wrong path.

We live in a world where social media has given both good and bad actors a platform, and the number of investment choices continues to rise exponentially. The need for specialist financial advice is more important than ever.

Blevins Franks has been advising clients in the UK and Europe for 50 years. Our advisers live locally and understand the local tax regime, regulations, and investment opportunities. They can combine investment advice with a holistic tax and estate planning strategy to ensure your wealth is preserved and you maximise your financial opportunities.

Contact Blevins Franks today.

These views are put forward for consideration purposes only as the suitability of any investment is dependent on the investment objectives, time horizon and attitude to risk of the investor. The value of investments can fall as well as rise, as can the income arising from them. Past performance should not be seen as an indication of future performance.