The financial dangers of decision fatigue

Staci West 16/11/2021 in X Millennials

Do you ever get to the end of a day and find you can’t decide what to have for dinner? It could be because your brain is just too tried – you have ‘decision fatigue’. On average, we make 35,000 decisions each day. Assuming you spend 7 hours sleeping, that’s roughly 2,000 decisions per hour. Decision fatigue describes how our decision-making gets worse throughout the day, as we make additional choices, and our cognitive abilities get worn out. Eventually, the brain looks for shortcuts to overcome decision fatigue, leading to poor decision-making – like ordering takeout when you have a fridge full of food. So apart from overspending on takeaways, what impact does decision fatigue have on our finances?

“I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make.” — Barack Obama, former US president

It goes without saying that deferring financial decisions is not the best way to build a secure financial future. Ultimately, the later you make a decision, the more time your debt has to grow and the less time your investments have to increase in value. But it’s human instinct to avoid what can be deemed as too big or complicated decisions. So, in the interest of making life easier for us all, here are four funds that do the decision-making for you.

Should I invest in large, medium and smaller companies?

Who says you have to choose? Marlborough Multi-Cap Growth takes an unconstrained approach, investing in small, medium and large UK companies. The fund currently leans toward medium-sized firms with 42%* of the portfolio in this area of the market, followed by 20%* in small caps, 18%* large caps and just under 14%* in mega caps.

Where in the world should I invest?

Latin America? Europe? Asia? Murray International Investment Trust invests in them all. With the ability to hold equities, as well as some bonds, manager Bruce Stout can invest anywhere in the world – and in any sector – making this a genuinely international portfolio. Within equities he currently has almost 29%* in Asia, 26%* in North America, 17%* in Europe, 12%* in Latin America and emerging markets and 5%* in the UK. Bond investments are from such places as South Africa, Indonesia, Mexico and the Dominican Republic*.

Will the stock market rise, or will it fall?

Sanlam Enterprise is a long/short fund meaning it can make money when share prices rise and when they fall. The managers use a wide range of trusted sources to identify investment themes and stock ideas. Their shorts are genuine sources of ideas and not simply used to ‘hedge their bets’. This is reasonably rare and obviously a huge plus for this fund.

Are equities or bonds the best place to be?

With inflation proving sticky and interest rates possibly rising, equities seem the clear winner as we head into 2022. But with some stock markets at record highs, there are also question marks as to whether their good fortunes can continue. Instead of choosing between the two, you could look for a multi-asset fund that invests in both – as well as other assets. One example is the Liontrust Sustainable Future Managed fund, which invests across a broad range of asset classes in companies with a sustainable edge. Actively monitoring and rebalancing the fund daily is a crucial part of the process.

*Source: fund factsheet, 30 September 2021

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.