Don’t get stuck in analysis paralysis

Aug 2, 2023

So, you’ve saved some money and intend to get to work on building an investment portfolio. Great! It’s time to do a little bit of research to figure out which investment products are right for you.

But as you start to explore your investment options, you find yourself overwhelmed by the sheer number of choices, the volume of data available. The more you read, the less confidence you have. You may be experiencing analysis paralysis.

What is analysis paralysis?

If you find yourself unable to make a decision because you continue to weigh countless pros and cons, you might be over-thinking it. That’s called analysis paralysis, and it can apply to pretty much anything, but seems to be a particular problem in the area of investing.

Analysis paralysis can happen when you’re making what feels like a big decision. It’s easy to over-research and over-think every possible angle of the decision to the point where you make no decision at all.

It’s not uncommon for investors to get wrapped up in the analysis of the many investing options until it becomes impossible to choose one. Instead of starting to build that investment portfolio slowly over time, an investor’s savings may simply accumulate in a savings account, languishing at very low interest rates.

What is opportunity cost?

You may fall into a state of analysis paralysis because you’re afraid of making the wrong decision. Maybe you’re plagued with worries about choosing the wrong stock or not timing the market correctly. In reality, making no decision is the wrong approach. It’s called opportunity cost.

Opportunity cost is when you give up the chance to make more money because of waiting. The money you’ve slated for investment sits in a savings account that earns little to no interest. Making no decision can lead to you losing out on other opportunities. Or you could end up spending your money instead, rather than putting it toward your future. It leaves you at risk of not reaching your financial goals.

How can I overcome analysis paralysis?

Like any worry or anxiety, the best way to overcome analysis paralysis is to understand that it’s happening and make an action plan that doesn’t involve fear as a motivating factor.

Start by knowing your investment style and how it can affect your asset choices. What is your tolerance for risk? Do you feel comfortable taking on more risk for the potential of a greater return, or would you prefer to play it a bit safer for more moderate returns? If you saw the value of your investments dip for a period of time, would you lose sleep? Do you have time on your side – in other words, is retirement 20 years away or just around the corner? Once you understand how much risk you feel comfortable taking, you’ll know better what to look for in your investments.

Research is important but limit yourself to a few key articles or tools. Get to know which analysts are well respected (check out Qtrade’s Analyst Ratings tool). At some point, you’ll notice that reading different sources won’t necessarily provide you with more useable information – just information overload.

Rather than trying to understand, weigh and compare every piece of information available, the best way to protect yourself from risk is to diversify your portfolio. At any particular time, while one sector maybe doing poorly, another may be taking off. The same holds true for investments.

Stop striving for perfection. There is no perfect investment. There is no perfect decision. Life, as with financial markets, can be unpredictable. Remember that investing is about long-term gains.

Show analysis paralysis the door

The best way to get past analysis paralysis is to start slowly and try a few things out until you get comfortable with investing regularly. Think about opening a free 30-day trial account with Qtrade and you can explore to your heart’s content.

Check out Qtrade’s portfolio-building tools, Portfolio Analytics, which can help you make more informed investing decisions. You can get a second opinion on your portfolio with Portfolio Score™, test your investing ideas on Portfolio Simulator™, or have an ETF portfolio built for you with Portfolio Creator™.


Learn more about Qtrade. 

The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.

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