News and information flow in a near-constant stream these days. There are hundreds of notifications, articles, and posts trying to grab your attention from the moment you wake up until it’s time to go to bed.
The problem is, too much information can often get in the way of making good choices. Information overload is particularly challenging for investors since their hard-earned money is on the line.
To help you keep things in check, find out how consuming too much information can hurt your investing decisions.
How information overload affects your investing decisions
When you are overwhelmed with a lot of information, it’s hard to filter out the noise and focus on what’s relevant to your situation. You might end up making poor decisions, or worse, fail to make any decision at all.
Information overload can prompt you to take the easy way out by buying or selling investments based on bias, guesswork, or any readily-available source. It can also cause analysis paralysis and you’ll end up waiting too long before landing on a choice.
Signs you’re overthinking your investments
You might be overthinking your investments if you’re experiencing any or all these signs:
- Researching endlessly
In social media speak, this is the closest thing to “doom scrolling.” You’re constantly looking for new information and reading a lot of articles while still feeling like you don’t know enough to decide.
Research is important, but it’s impossible to choose when there are plenty of investment options and you’re stuck trying to study every little thing.
- Constantly monitoring your investments
It’s natural to be curious about how your investments are doing. You want to know whether things are turning out the way you hoped or if you need to make changes.
However, obsessively checking your investments’ performance might be harmful. You can end up overthinking things and become susceptible to emotional investing.
- Deviating from your strategy
Once in a while, it’s good to fine-tune your investing strategy so it stays aligned with your priorities. However, it can be counter-productive to frequently switch up your strategy and abandon your original plans.
This is likely a sign that you’re overloaded with information and you’re trying to follow investing advice from too many sources at once.
Simplifying your decision-making
You can prevent overthinking while investing by making your decision-making process simple. Here are some ways to simplify:
- Start low
The fear of losing money is a huge concern, especially for beginners or conservative investors. When investing in something new, it helps to start with small amounts first if micro-investing is an option.
This way, you won’t worry too much since a bad decision won’t be costly. You’ll also gain experience that can help with future decisions.
Peso-cost averaging is another option if you want to start small, minimize risks, and stay consistent.
- Set clear and defined boundaries
Limit your choices so you don’t have to think about every little possibility. Set your criteria and ask specific questions to help narrow down your choices.
You might be wondering: “where should I invest my money as a beginner?” To be more specific, you can ask: “What’s an investment that’s easy to understand, matches my risk profile, and has the best potential to grow around 5% within 3 years?”
- Look at the bigger picture
Investing shouldn’t be a one-and-done thing. Keeping this in mind can ease the pressure of finding the perfect choice.
Your portfolio may have room for different products and so you don’t have to worry about missing opportunities if you choose one over another.
Remember that risks are always present in investing, and so there is no perfect or completely safe option. You may be able to tune out the noise by aiming for sensible choices instead of chasing perfection.
