The Problem That Is Analysis Paralysis

Analysis Paralysis refers to a situation where an individual or group of individuals find it hard to make progress with a particular decision because they keep overthinking and overanalyzing it

Ever sat in front of your laptop or TV trying to decide what movie to watch or what channel to tune into that you end up not watching anything at all?

These are the situations where we spend time overthinking a problem with varying courses of actions. In those moments as opposed to making one decision, you could end up overanalyzing the situation, so much so that at the end you are unable to make any decision.

Because we don’t want to make the wrong decisions, we end up not making any decision at all. This is what is known as Analysis Paralysis and it has proven to be one of the greatest hindrances to success – especially in the world of investments.

What is Analysis Paralysis?

Analysis Paralysis refers to a situation where an individual or group of individuals find it hard to make progress with a particular decision because they keep overthinking and overanalyzing it.

In the investment world, analysis paralysis is all too common as your hard earned money is at stake, and you have so much to consider. With several investment decisions, it is not uncommon to have analysis paralysis, particularly when it involves making buying or selling decisions.

While carefully analyzing your options before you make a move is great, getting stuck on the analysis table is one thing that prevents you from taking any active step.

Some people spend months and even years trying to determine what stocks to invest in. More often than not, the decision never comes.

Reasons for Analysis Paralysis and how to mitigate it

There are different ways people get stuck. The first occurs when a person is not sure of the best methods to employ in order to identify the potential outcomes.

Depending on the kind of analysis being carried out, there are often different ways to determine the same thing – and their results could be different.

Another issue is that you could get stuck with too much information. Today, a myriad of concepts, theories, and verified practices have been documented to assist any investor in making decisions. They could help, but they could also slow you down.

A third reason for it occurs when one feels highly pressured to make a decision, even without being sure of the outcomes of the alternatives. Basically, it can be overcome by refusing to overthink basic decisions.

This is not to mean that analysis is wrong, but when it becomes crippling excessive, then its better to ignore it and just take a plunge into that decision.

There is also the situation of bringing in emotions into the decision making process. Emotions like fear could impede on logic and delay the decision making process. While there are a number of ways to circumvent this, one clear method is to weigh just results.

Investors typically depend on standard logic and a myriad of other forms of analysis (like fundamental analysis) to assess facts towards determining the best course of action.

Typically, the result of this analysis should lead to clearly defined distinctions of the pros and cons of that decision. By separating the pros and cons, you should be able to make a decision as more weight will be placed on certain decisions over others.

With this, you will assess only information that allows you form an opinion and set aside your emotions, banking on logic to make your decisions. However, it is pertinent to note that some decisions cannot be accurately determined.

Hence, while the analysis serves as a guide, it doesn’t provide all the answers and does not guarantee everything. Sometimes, you just have to trust your gut and go for what you want.

Written by Lawretta Egba.