Paradox of Choice and Investing

Barry Schwartz introduced the concept ‘Paradox of Choice’, which suggests that after a certain number, the more options we have, the less satisfied we feel with our decision. Having too many choices leads to increased regret over the decision we make.

There are so many to choose from in stock investing. Once you take a position in few stocks, you deprive yourself of all the other opportunities. If you are not okay with filtering out the options that don’t align with your investment philosophy, you will always find yourself in FOMO (fear of missing out).

There will always be some stocks that will be doing better than your portfolio in the short period. But chasing the fads and the trends will lead you to move out of your circle of competence where chances of making error is higher. If you want to avoid the curse of FOMO, limit your investment universe that suits your investment horizon, competence, and risk appetite. Be okay with missing out on the hottest stocks of the time. Fewer decisions lead to fewer mistakes. Narrow your playing field to increase your probability of success.