By definition, maximizing refers to “increasing [something] to the greatest possible amount or degree” while simplifying refers to “making [something] less complex or complicated”. Applying these two opposing strategies to your investments can lead to different results.
Let us find out which strategy is more productive.
With the sole purpose of increasing the value of their portfolios, “maximizers” are vulnerable to the trap of purchasing a product off the bat. They may be too optimistic and expect the best possible outcomes. This idealistic thinking can be far from reality. The truth is, there will always be a few decisions that would not work in your favor.
Aside from investing on the wrong products, maximizers can be overwhelmed and stressed about the abundance of investments that they bought. The mindset of a maximizer is focused on the overall potential that various investment can offer rather than optimizing a single investment.
Sure! You can actually earn five times more than your initial cash-out if you added all of these options. However, can you really pay attention to all of it?
Most people cannot. They end up putting “so-so” effort into each of their investments and fail to achieve the best scenario that they previously envisioned. Also, they end up being drained. Drained investors can become unproductive. Being unproductive may later result to a significant loss.
With all the money at stake, do you still want to maximize?
If your answer is “NO”, try the second strategy called simplifying. Simplifying allows you to create a portfolio that is easier to manage by eliminating complex investments. To tell you frankly, investing does not have to be difficult! You just have to focus on one thing at a time.
Start by analyzing all the possible investment options that you can afford. Next, determine which options suits your personality the best. Remember that investing is more than just about the outcomes.
A powerful mindset that “simplifyers” possess is contentment.
According to Psychologist Barry Schwartz, people who are preoccupied with the best possible outcomes are less satisfied and more susceptible to “buyer’s remorse” than the people who are satisfied with the outcomes that are good enough.
Maximizing can be counterproductive to your investments. The more you try to grow your wealth, the more you can inflict strain and stress to yourself.