Analysis Paralysis

June 22, 2014 · 2 comments

If you live in The States you’ve probably been to Costco. While the store is practically busting at the seams with stuff, Costco typically only carries about 4,000 unique products behind its walls. Your much smaller local grocery store, however, carries around 40,000 different products. So what’s the deal? 

Costco understands psychology and analysis paralysis.

If you’re like me, you’ve gone to Costco to get a box of cereal and some chicken, but an hour later you walk out $200 poorer with a cart full of Paydays (best candy bar EVER), pretzels you didn’t even want, and a three-gallon tub of mayonnaise that will expire before you finish it.

It took me almost two years to finally get around to investing for the short-term. I don’t consider myself a lazy person, but when it came to investing outside of retirement, I shut down.

There were too many different avenues to explore. Which stocks, bonds, or mutual funds should I buy? Is real estate going to appreciate over the next 8 years or stagnate? Should I consider investing in gold, silver, or other precious metals?

Instead of answer the questions above, I did nothing.

Did you know that, on average, 401k plans that offer dozens of different investment options have fewer people contributing to them than 401k plans with only a handful of choices.

I bet some of you are guilty of this in one way or another, aren’t you?

  • Maybe you haven’t started paying down your debt aggressively because you feel like you don’t know where to start.
  • Maybe you haven’t contributed a dime to retirement because you can’t figure out which fund you should buy.
  • Maybe you changed your major in college 87 times because you kept re-discovering what you wanted to do with your life.

Has the paradox of choice ever affected you?  If so, in what ways?

{ 2 comments }

1 Allie

Yep. I’ve only ever bought stock in three companies and one mutual fund, because I have no idea how you’re supposed to decide what to buy. When people start to talk about stock indexes or dividends, my eyes kind of involuntarily glaze over. Where are you supposed to go to learn this stuff if you never took an accounting class in college?!

2 Lady-T

Yup! I recently opened up a Roth IRA and I kind of just googled some stocks that were “Up and Coming”. How’s that for a strategy?! LOL Terrible I know. I bought a couple shares and 3 or the 4 I bought are at doing pretty good but the 4th is not doing so great. I have no idea what I’m doing. I should probably have a financial planner go over this with me to see if I could be doing better else where.

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