Paralysis by Analysis

The process from getting off the research wagon and actioning your investment plan may seem like something which would be a welcome and simple step to take. However for me I found this step surprisingly difficult to do.

I spent so long learning and researching shares and investments, but when it came time to actually dive in, I found myself unable to finalize my investment plan. Due to an overload of information I was almost paralysed by indecision.

I would like to address some of the things I learnt from this process & what changed to finally get me out of this situation and start investing.

The Comfort Zone:

I have mentioned previously in posts that I spent a lot of time at the start in “research mode”. This research phase was a comfortable period for me because during this time I was also creating and subsequently learning to stick to a budget and therefore there was no real risk to my personal funds. I had started spending smarter and my bank account was beginning to look healthy. (finally)

At the start I felt like I was taking big steps towards my financial goals, which made me feel great. However this time spent planning and research unintentionally became my comfortable and safe zone.

I had grown my savings rate to a healthy level, and had built an emergency fund to the value I had planned. Now I was building my savings to invest the extra into Shares.

I saved enough to get started but told myself maybe I did not have all the information. I reviewed all the funds I was planning to invest in and turned my plan inside out trying to see what I had missed.

I didn’t realise it at the time, but I was stuck in a rut and because of that I missed some big opportunities.

The price of indecision:

During my time stuck in the Comfort zone, it’s true to say that my funds were not at risk. I wasn’t losing money. However, at the same time my money was not working for me. I missed a number of dividend cycles, a large dip in the market which would have been an excellent time to buy more shares and on top of that, my money was sitting in my bank account earning me close to zero interest. The missed opportunity by not deciding is something I will never be able to get back.

Now yes, it is important to have a plan and to understand the risks that are associated with that plan, but in my case I had already done the research and should have had faith in myself and my strategy. I think it’s really important to realise once you have done the hard work and when it is time to take the training wheels off and execute the plan.

Lesson learned:

For me I took away a valuable lesson from this process. The ability to make decisions is so important.

I feel that maybe making a decision, even if it turned out to be a wrong decision, would have been more productive and taken me a step closer towards my financial goals compared to not making a decision at all.

I often think I was worried about smaller unimportant things which I probably knew were not so critical at the time. However, that made it easier for me to justify not acting. The reality is I delayed my investment which means my money was not working hard for me and therefore I missed time in the market and all the potential rewards that would have included.

Also I sometimes felt that if I waited long enough a decision would be made for me by an external force. For example, if one of the funds I was looking at closed then I would have to invest in the other. But obviously that didn’t happen and you cannot wait forever otherwise no decision will be made.

With the benefit of hind sight I can see what I have missed out on. However even if I had made a decision which ended up being a mistake, I think by being invested in something, I would have been forced to rectify any mistakes quickly and therefore ended up in a better position sooner.

The Go moment:

The decision to pull the trigger on my first investment came after a discussion around the family table. We were not discussing investments, the discussion was not even directed at me specifically. My father, brother and I, (who all work at different companies and in different industries) were talking about the past week at work and catching up. One of them spoke about an issue in their workplace which stemmed from the indecisiveness of someone from their management team and what it had cost their company in the long run.

Now I don’t run or operate a business but I remember feeling that I was making a similar mistake. I didn’t see it myself before that point. So after that discussion I set myself 7 days to finalise my plan and purchase my first round of ETFs.

That was on a Wednesday night. By the weekend my wife and I had discussed the options, agreed on the final strategy (which had not changed in any substance in several months) and set the buy rate on our online broker account for Monday.

Monday morning came, the market opened and our purchase was executed.

I remember being fairly nervous before the first purchase of ETFs. Once the buy went through, I felt more relaxed about the whole plan and I felt a great sense of achievement in the step we took that day.

If I could go back and change anything about this process it would be to reduce the time I sat on my funds before investing them.

We are still investing regularly in accordance with that first plan and are excited to reach our next big milestone hopefully in the coming months.