Having Choice and Guidance Isn’t Always a Good Thing


There is rarely a week that goes by without a new fund being launched. There is also rarely a day when someone does not recommend a stock or a bond. It’s enough to make an investor’s head spin. It certainly complicates the process of choosing a good investment and sticking to a long-term investment strategy.

The problem is not limited to just the broad array of investment recommendations. Even if all you want to do is buy an index fund designed to track the performance and volatility of the S&P 500, you will have to choose from at least 14 mutual funds and exchange-traded funds. (I’ll have more to say about S&P 500 index funds in next month’s AAII Journal.)

While people like having choices, too many options makes settling on one specific choice difficult. There is a technical term to describe this problem: the excessive choice effect (ECE). The ECE refers to the inverse relationship between the number of options and the ability of a person to make a choice. It is most famously related to a study involving jam. Authors Sheena Iyengar and Mark Lepper found that consumers more likely to purchase jam when presented with six choices than when they were presented with 24 choices. Continue Reading »

Let AAII Guide You to Top Mutual Fund Selections

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Highlights from this month’s AAII Journal

AAII Sentiment Survey

The bull-bear spread reached its tightest range since August 2016. More about this week’s results.

This week’s results:

  • Bullish: 33.1%, down 2.7 points
  • Neutral: 34.5%, down 2.0 points
  • Bearish: 32.4%, up 4.7 points

Historical averages:

  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

Take the Sentiment Survey.

The Week Ahead

The U.S. financial markets are closed on Monday in observance of President’s Day. On behalf of everyone at AAII, enjoy the extended weekend.

Earnings season rolls on with 51 members of the S&P 500 scheduled to report. Included in this group are Dow Jones industrial components Home Depot (HD) and Wal-Mart Stores (WMT) on Tuesday.

The week’s first economic reports will be the February purchasing managers’ manufacturing index (PMI) flash, which will be released on Tuesday. Wednesday will feature January existing home sales and the minutes from the January/February Federal Open Market Committee meeting. January new home sales and the University of Michigan’s final February consumer sentiment survey will be released on Friday.

Philadelphia Federal Reserve Bank president Patrick Harker will speak on Tuesday, and Atlanta president Dennis Lockhart will make a public appearance on Thursday.

The Treasury Department will auction $26 billion of two-year notes on Tuesday, $13 billion of two-year floating rate notes and $34 billion of five-year notes on Wednesday and $28 billion of seven-year notes on Thursday.

Local Chapter Meetings

AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you! Upcoming Meetings »


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