So many decisions, but where to invest?

[amarowsky]

I have been on this forum for a decent amount time, and I often hear the same questions I get from my friends. "where should I invest for my ________"
_______ being savings for a house/boat/car, retirement, vacation home, vacation etc... And when you are given soo many options to invest it brings along almost a daunting quest to choose which. If you manage to choose one you seem to never be satisfied, because even if your stock/bond/fund/etf does well you will look at X amount of the other 10000 choices and see at least Y that did better than you. The opportunity cost coupled with the decision makes you feel worse for not choosing the perfect stock, than investing none at all in some cases.

I got this frame of mind from this really excellent video on TED.com, Barry Schwartz's lecture called "the paradox of choice"
Barry Schwartz on the paradox of choice | Video on TED.com

My philosophy teacher showed our class this video and it's really quite interesting. It's about 20 mins so if you have some time, and are interested in his theory that More than one choice is definatley good , but too many choices can sometimes be worse than less.

Let me know what you think of this video, just to kind of throw around a few different perspectives. My friend tells me that "choice paralysis" has been facing a lot of criticism lately, but I still think that in many situations this is true. ESPECIALLY true in the selection of stocks for a 401k, roth IRA, or general portfolio considering the massive options offered by Schwab, Vanguard, HR Block, etc...

[amarowsky]

His video is really good, he explains how his research shows that for every 10 extra choices of mutual funds, employee's show a 2% less participation rate.

[tmijs789]

I new I wasn't far off in my thoughts that it has been getting increasingly difficult to make choices today.... and I certainly agree with your statement below....

... "choice paralysis" has been facing a lot of criticism lately, but I still think that in many situations this is true. ESPECIALLY true in the selection of stocks for a 401k, roth IRA, or general portfolio considering the massive options offered by Schwab, Vanguard, HR Block, etc...

Thanks for posting the video link and introducing me to Barry Schwartz. He's quite a character actually.

~ Cheers

[EconoMutt]

Good Link.
I work for a computer company and I've told our marketing people for some time that we are giving our customers too many choices.
They get so confused that they keep delaying the decision to make a purchase.

[disneysteve]

Good Link.
I work for a computer company and I've told our marketing people for some time that we are giving our customers too many choices.
They get so confused that they keep delaying the decision to make a purchase.

I've posted about this topic before, though more on a retail side than a financial side. Stores have gotten bigger and bigger as the number of choices offered has grown outrageously large. Walk into a WalMart or Target and browse around. Go to the toiletries area and count how many different shampoos there are, for example. There are easily over 100 in most stores. Look at small appliances. It isn't unusual to have a selection of 18-20 irons or blow dryers. What can possibly be so dramatically different between them? We're not talking about terribly high-tech devices. One day at the supermarket, while in line my daughter counted 55 different chewing gums for sale by the register. Do we really need that kind of selection in order to be happy? Personally, it drives me a bit crazy.

[Broken Arrow]

TED is just fantastic. I'm so glad that the work firewall does not block this site.

Basically, I think there is such a thing as too many choices, but I think there can also be too few choices. Mr. Schwartz doesn't deny the merits of choice, but his lecture is focused on the downside of choice. In the end, there may be a sweet spot somewhere in the middle.

I do find it a bit strange that he picked Vanguard as an example rather than, say, Fidelity, because Vanguard has traditionally been known to be a place where minimalism of choice was preferred. At least, when Jack Bogle was still in charge. The subsequent CEOs such as Jack Brennan was the one that expanded into stuff like ETFs and so on.

[wincrasher]

Well, when you count your customer's in the millions, it's hard to appeal to all of them. As you can see on this forum, there are lots of individuals with quite varied opinions and tastes.

Choice is good for alot of reasons - competition keeps prices down, creates jobs for people and satisfies the varied needs of individual consumers. Is it the best use of resources to have 50 types of chewing gum? Probably not, but if they weren't selling, then you'd start to see them disappear.

But it is an interesting phenomenon - often I go into Wal-mart and leave with nothing because the information on the packaging of multiple items couldn't tell me enough to make a decision. Marketing often want's less info on the box cover so as to not confuse the customer - but I'd argue that more information would be better, and end up being more profitable for them.

Anyone remember the old days when products were out on display? You could actually touch them and try 'em out? Remember there used to be people in the store - think they called them "salesmen" that could actually tell you about the products and help you decide which one was right for you? Then we got electric lights and indoor plumbing and all was lost!

[ea1776]

Anyone remember the old days when products were out on display? You could actually touch them and try 'em out? Remember there used to be people in the store - think they called them "salesmen" that could actually tell you about the products and help you decide which one was right for you? Then we got electric lights and indoor plumbing and all was lost!

ROFL

[Saving_spree]

Nice Video...

You are the best person to decide where to invest... Think twice before investing..