Friday, 3 October 2014

Analysis Paralysis

I suffer from a serious case of Analysis Paralysis. There!  I have come out and said it!  However in recent times I have noticed that the financial industry tends to amplify my inability to take a decision and execute to it.  With the myriad of options available for any financial product, it becomes very difficult to review the features of each product, compare against other similar offerings, and decide on the best course of action for my particular situation.  The inconsistent, many times inaccurate, and almost always needlessly complicated financial jargon, makes it practically impossible to decipher the pros and cons of the different products in a rational manner, and come to a critical decision.

Also, I constantly worry about either making the wrong decision, or choosing a sub-optimal product offering that does not give me the "best deal".  In the process of looking for the "best deal", the actual decision is not taken, or significantly delayed, which in reality might have a bigger impact on my overall financial health.  Take for example, my recent search for a good top-up health insurance plan.  I have been checking out health insurance documents and websites of several leading health insurance providers, trying to find a match for my requirements, and trying to secure the "best deal".  Its been six months now, and I have not settled on any single top-up plan.  The more information I read, the more data I collect, the more confusing it seems to get.  How do you deal with these kinds of situations?  In the personal finance world, there are always decisions that need to be made, and made at the right time.  Should I invest in this IPO or NFO?  Do I need more life insurance?  Are ULIPs a "good deal" now? Which MF should I pick?  Is it time to start a new SIP?  How should I save on taxes this year?  Are debt funds no longer financially attractive?  And the list goes on .. 

This reminds me of a childrens story from Aesop's Fables. The fable is about the smart and wily fox, and the simple straightforward cat.  One day the fox and cat are discussing ways to escape from danger.  The fox boasts that he knows a hundred ways to escape, he can run fast, he can zigzag, he can hide, he can walk on two legs, he can dance, he can sing, and the list goes on .. The cat on the other hand says she knows only one way to escape.  At this, the fox laughs derisively and touts his superiority and intelligence. Suddenly they both hear the sound of hunters and hounds rapidly approaching.  The dogs are running in fast and and both the fox and cat need to escape or risk getting caught. The cat quickly uses the only way she knows how to escape, and climbs up a tree as fast as she can, and out of harms way. The fox on the other hand tries to figure out the best way to outwit the dogs and the hunters.  He first decides to try and outrun the dogs, but then changes his mind and tries to hide, but then again he decides to run zigzag, but by then it is too late, and the dogs are upon him in a flash, and he is caught by the hunters.  This particular fable is ancient, and is even today a fun story to share with kids.  But the moral of the story remains clear.  Many times, it is better to take quick decisive action even if it may be simple or uncomplicated, or not the most optimal, rather than spend many hours thinking about the various possibilities but not end up making a decision.  

So now I have vowed to myself, that after I complete a basic or first-cut level of analysis for any financial product, I will take a swift decision and go ahead and execute to my plan.  I will not spend a ton of time and energy considering the many different options and secondary details, and end up with a delayed decision or worse no decision at all!  How about you?  Do you have this same issue?  Do you get an overload of information from news channels, news papers, magazines, your financial advisor, online websites, and your friendly uncle :-) Will you take the same vow and go in for a quick decision henceforth?  Let me know how it works out for you.


  1. Hi, ....please do post more regularly..... I have personally benefited from your blog, I have diversified my passive income streams by have income from dividends from blue stock portfolio income, tax free interest income, plus looking to invest in REITS when they are launched by end of the year which will get a monthly income flow plus the additional benefit over allowing me to diversify my income stream and my portfolio.

    I also follow a blog although some of the postings are not relevant to India..... it has helped me plan so that I can get out of the "Rat Race" (my passive income is more than my household expenses). To take care of inflation my final portfolio will be 50% in shares, where the dividend will be used for monthly household expenses, Tax Free Bonds where the interest would be used for monthly household expenses, Equity Mutual Funds for the capital invested to grow tax free and to best inflation over the long term, Gold ETF's to act as a hedge against inflation and as I have mentioned once REITS are offered in the market, it will give me further diversification by adding a real estate play in my portfolio plus offering me monthly income.

    I agree with so many competing products it’s difficult to know which product to invest in and with similar products the difference between the different options.

    In my personal case I wanted to port (change) my provider for Health Insurance. To make health insurance plans more customer-centric, Insurance Regulatory and Development Authority (IRDA) issued new set of rules this February'2013 and made effective from 1st of October'2013 .... They have asked all health insurance service providers to unify their offering in terms of

    Minimum entry age:


    Predictability in premiums charged:

    Standardisation of terms and definitions:

    Standardisation of claim process:

    Personally I have ported (changed) from ICICI Lombard to Apollo Munich as besides covering additional illness's, Apollo's premium were lower . Also I got feedback that Apollo’s customer care was more responsive........Let me know your thoughts????

  2. Just to further clarify what the terms in case of Health Policy mean

    Minimum entry age: Unlike earlier, you may now be able to buy health insurance till 65 years of your age if you are a first-time buyer.

    Renewability: It has been a standard practice followed by insurance companies to allow you to renew plans only till 75-80 years of your age. But with introduction of new rules, insurers would offer you renewals of your policies for life time. This would be helpful for those who are in 80-plus age group.

    Predictability in premiums charged: It has been observed in the past that companies often followed aggressive pricing in their initial years to gain market share. But as and when they achieved their primary objective they started increasing premiums randomly. This will stop now. Moreover, now onwards, your insurer can't charge you more if you file claims frequently. Insurers will have to consider all its health insurance policies before making any changes in the premium charged to a customer. This would make insurance premiums more predictable and avoid negative surprises.

    Standardisation of terms and definitions: Since health insurance is a contract between you and the insurance company, it includes a number of terms and definitions. But experience so far has been that the same term is interpreted differently by different insurers. This may give rise to confusion and confusion often leads to problems while settling claims. Standardisation would make it easy for customers to understand policy wordings.

    Standardisation of claim process: As per IRDA, decisions pertaining to claim settlement can't be outsourced and hence the insurers will now interact more directly with hospitals while handling claims. Third Party Administrators (TPAs) would have a major role only in processing activities now. Furthermore, simplification and standardisation of claim settlement form would help speed up the process of claim settlement.