Choice overload

Psychologieab 9 J.

Too many options paralyse us: instead of making a decision, we don't decide at all. Explains why many people never start investing – “Which ETF should I choose?”

Choice overload (being overwhelmed by too many options) means that more choice leads to worse decisions or no decision at all.

The famous jam experiment: customers in a supermarket could taste 6 or 24 jams. Result: with 24 varieties, only 3% bought one. With 6 varieties: 30%. Ten times as many customers made a decision – with LESS choice.

With money:

• "There are 2,000 ETFs – which one should I take?" → None. Result: the money stays in the current account.
• "Which of the 50 insurers is the best?" → Postpone the decision.
• "So many savings products – I can't see through it all" → Don't save at all.

Remedy: simplify! For 90% of people, ONE ETF (MSCI World), ONE overnight money account and ONE liability insurance are enough. Don't optimise – act!

Did you know? Barry Schwartz described this phenomenon in his book “The Paradox of Choice”: more choice doesn't make us happier but unhappier – because we always think we made the wrong choice.

→ ETF-Rechner

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