It’s our choices… that reveal who we really are, far more than our abilities. – JK Rowling
Passover is now over, which means that for parents with children in the Jerusalem education system, the stress of figuring out where your children will go to school next year is at its peak.
Within the next few weeks, the municipality will send letters to send children to different schools. While 70%-75% of parents will be satisfied, the rest are left scrambling to find a plan B, because they assumed they would go to the school of their choice.
I don’t know how it works in other parts of the country, but in the capital, parents have to rank, 1-4, the schools they want their children to attend. Sounds like a good system, if you don’t get accepted to your first choice, chances are pretty good you’ll end up with your 4th ranked school. Why? It’s too complicated to explain in a forum, and after all, this is a personal-finance column.
Growing up as an Orthodox Jew in Seattle, there were no school options. We had a school to go to, like it or not. Five kids are either currently in the K-12th-grade system here, even after all these years, I’ve never gotten used to both the system and the sheer volume of how many schools there are.
Don’t get me wrong, I’m all for giving people as many options as possible. But there is a downside. I find that schools are very “niche” based – because they need to differentiate themselves from the competition. As such, if your child doesn’t really fit the niche, this can be a problem.
Contrast that with a one-school system, where it’s more of a melting pot, and everyone makes their way through the system and gets along with each other. All that being said, I would still take the ability to choose from many options and try and find the best fit for each specific child.
Too much choice can be harmful
When it comes to investing, sometimes, too much choice can be detrimental. Investors need to tune out all the marketing and the 24/7 financial news cycle and focus on keeping their investment strategy simple.
I received a call a few weeks ago from a woman who was a nonprofit. She had about $1 million in the bank and wanted to get some kind of positive return on the money. Money needed to be more liquid. She also wanted some very conservative developments. These goals were to keep money available and reduce the fundraising burden in the future.
She told me that she met an insurance salesman at some kind of weekend retreat, and he started offering some complicated insurance products with different annuities as a solution to her problem. She didn’t understand what he was proposing, but it sounded impressive, so she almost convinced him to handle the money.
I explained to him the products I offered, the costs involved and that he would be giving up liquidity, which was very important to him. He had second thoughts.
In a Morningstar article about the complexities of investing, chartered financial analyst Amy C. Arnott wrote: “The fund industry has grown into a colossus worth more than $20 trillion, with more than 10,000 mutual funds and exchange-traded funds (not including multiples). share classes) available to investors in the United States. Such abundance is an embarrassment of riches for the everyday investor, but does not always lead to good results.”
“Recent fund launches have become increasingly esoteric and niche-oriented: Over the past three years, for example, fund companies have launched at least 139 funds focused on options trading, 53 leveraged equities, 39 digital assets (aka cryptocurrencies), 26 trade-inverse equities, 274 sectors , and 205 thematic funds. Not only can this range of options be overwhelming, but it often leads to poor investor outcomes,” she wrote.
While all these options look amazing and will do wonders for your portfolio, the numbers tell another story. Arnott cites data showing that this sophistication has negatively impacted investor returns.
There is a famous acronym in the business world called KISS – Keep it Simple Stupid. This certainly applies to investors. You don’t need to build a portfolio with 30 or 40 different assets. Having too many different assets makes it more difficult for investors to keep track of each investment, potentially increasing costs and adding more time needed for rebalancing.
There are advisors out there who preach building portfolios using four or five ETFs, and that’s it. Depending on the client’s needs and goals, I usually add a few more ETFs to the mix, but in general, we all agree that the best strategy is to keep it simple.
Too esoteric, don’t expect good returns. Save yourself time and money and keep it simple.
The information contained in this article reflects the opinion of the author and does not necessarily reflect that of Portfolio Resource Group, Inc. or the opinions of its affiliates.
Aaron Katsman is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing and is a licensed financial professional in both the United States and Israel and helps people open investment accounts in the US.