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A Guide for Confident Investment Decisions


Paralysis by analysis is a common issue in personal finance, affecting individuals in varying ways. It is, however, somewhat healthy, often indicating a concern for money and its future.

Taking time to make a decision, be it a week or a month, is acceptable, provided a decision is eventually made. If not, it signals a problem. Overcoming this issue may be challenging, but it’s possible if we change our approach to decision-making.

In personal finance, mistakes fall into two categories – those that can be rectified quickly and those that can’t, perhaps never. Our fear of making decisions stems from our fear of making mistakes.

A significant lesson from investment experience is that we can never predict whether our investment choices will yield positive results. We may spend hours analyzing, but ultimately, it boils down to a leap of faith. This holds true for insurance as well.

Investment isn’t a one-time activity but a continual journey of learning and adaptation. Therefore, start fearlessly with fundamental knowledge.

Thankfully, a stock or mutual fund investment is easy to correct if things turn sour. If one chooses a simple index fund, that headache is then gone. See, for example, How Avadhoot Joshi evaluates his investment portfolio.

This principle even extends to the selection of an investment advisor. Until we initiate a relationship, it’s impossible to determine the accuracy of our choice. If it turns out to be incorrect, we can dismiss them and hire someone new or resort to frustration-induced DIY. If you’re looking to streamline the selection process from thousands to a select few trusted advisors, consider perusing our list of Fee-only Financial Planners in India (SEBI RIAs). Over 1000 of our readers already collaborate with them.

DIY investing can be straightforward if you haven’t made too many errors. Here are a few general guidelines to follow without falling into analysis paralysis (provided you have faith in our research and experience).

  • If you have a need arising five years from now, a 100% fixed-income portfolio is advisable. If you’re concerned about debt funds, opting for a Fixed Deposit (FD) or Recurring Deposit (RD) is a good idea.
  • If your need is in to be in the 5-10 year range, allocate 20-30% to equity (index fund) if you’re prepared to systematically reduce this exposure over time. If not, it is better to stick to fixed income.
  • For needs more than ten years away, starting with an initial asset allocation of 60% in equity (index fund) and the remaining in fixed income is recommended. The most crucial step is to begin! It’s important to consistently invest and continuously educate yourself on managing portfolio risk.

The point is: If you avoid ULIPs, insurance products, or any tax-saving products, you can begin investing and learn as you go. Choosing index funds can also eliminate half the stress about fund performance. Choose the new tax regime; tax saving is no longer a headache.

In other words, you can significantly reduce decision paralysis in money management by focusing on why you are investing and opting for simpler choices like passive funds and the new tax regime. Understanding that you can’t predict the perfect choice in advance is important. You don’t have to.

The crucial step is to start investing. Once you’ve begun, you must maintain your investments and slowly understand goal-oriented risk management.

To summarize:

  • Stop overanalyzing.  Catalogue all your stock and fund investments and link them to your long-term goals. Don’t add any more funds or stocks. Focus on correct asset allocation using the thumb rules mentioned above.
  • Keep an investment journal: Make sure to invest regularly and document your investments. Aim to increase your investments by 10% annually. Only after doing all the above can you consider how to minimize risk in your portfolio in the future. Our goal-based planning course can help you with this.
  • If you are worried about “being late”, regret can hinder us even more than overanalysis. The past is past, and there’s no use dwelling on it. Live in the present and plan for the future.

It may sound strange, but the only way to overcome the fear of making mistakes is to make a few, learn from them, and avoid repeating them.

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Pattabiraman editor freefincalDr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.


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Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!

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Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.

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