Analysis Paralysis

Investors need to embrace the fact that every decision about the future requires a leap of faith. 

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Analysis paralysis
Welcome to the Know the Difference Minute for Wednesday, October 25th.
The grocery store has hundreds of varieties of cereal. Which one is the best? Do you check every label? Have you sampled them all?
Analysis paralysis is when people get overwhelmed with too much information, leading to inaction or poor decision-making.
Choosing the right cereal is a pretty low stakes decision. Choosing the wrong investment can have bigger consequences.
Investors need to embrace the fact that every decision about the future requires a leap of faith. Some leaps are less treacherous than others. Information is costly, so there’s an optimal level of ignorance.
To overcome analysis paralysis set clear goals, know your tolerance for risk, and have a long-term perspective.
Diversification is another solution; spreading investments across different assets reduces the impact of a single bad decision.
Working with a professional can be a big part of the solution.
I’m Brian Jacobsen, Chief Economist at Annex Wealth Management. That is your Know the Difference Minute.