You should see me at dinner. It’s borderline embarrassing.
It’s not because I get specks of pepper stuck in my teeth -OR- because I prefer licking my fingers over using a napkin.
It’s because I have menu-phobia.
I open the menu and immediately go cross-eyed. Rosetta Stone could help at times, but usually the menus are written in perfect English. Although I fully understand what I’m looking at, it’s overwhelming.
In America, we are taught to love choices. The more choices we have, the better…
…to a certain extent.
*I recommend you watch this 20-minute video about The Paradox of Choice.*
Author Barry Schwartz argues that infinite choice is paralyzing, and exhaustive to the human psyche. When we visit the grocery store, we are confronted with the choice of 285 varieties of cookies, 75 ice teas, 230 soups, and 175 salad dressings. Things that are supposed to be simple are now difficult decisions.
Where Should You Invest?
The overwhelming feeling I get when looking at restaurant menu’s must be the same feeling most Americans get when reviewing their 401(k) -OR- thinking about where to invest.
A simple recommendation of “invest with Vanguard” still leaves an investor a choice between 300 some-odd funds.
So what’s an investor to do?
- Consult with an Investment Adviser or Financial Planner
When it comes to investing, low costs and expenses should be a common goal. At the same time, it could be extremely beneficial to receive some unbiased advice (even if you have to pay a small fee).
- Select a Target-Date Retirement Fund
These have grown wildly in popularity. I, personally, love to rebalance my portfolio annually; but the bulk of Americans do not. Target-Date Funds are a great “set it and forget it” approach. Here is a small blurb from The Truth About Target-Date Funds:
In a 2001 paper, economists Shlomo Benartzi and Richard Thaler found that many 401(k) investors practiced “naive diversification”: They would spread their bets among whatever options were offered, so if the plan had lots of stock funds, they’d have lots of stocks.
Other researchers found that investors were prone to inertia. They tended not to change their holdings over time, ending up with the same risky portfolio at 60 that they had picked at 45. And they were saving too little, in part out of sheer procrastination.
Readers: Have you ever looked at a menu and become paralyzed? In the same way, have you ever contemplated investing, but didn’t because of the overwhelming options?