Earlier this year, I read “The Little Book on Common Sense Investing” by Jack Bogle. There was one quote in the book which stood out…
“The greatest enemy of a good plan is the dream of a perfect plan. Stick to the good plan.”
Bogle is explaining this quote in the context of choosing investments. Which index fund should you choose if you want to invest in the US stock market? Do you want to invest in a total market fund or in a S&P 500 fund? Maybe one returned 10% last year while the other returned 11%. One holds over 3000 stocks while the other holds 500. It is easy to get lost in the fact sheets of the index funds, where you can find reasons to invest in either. It is a tough decision. However, as Bogle mentions, the total market fund and the S&P 500 fund he was looking at were 98% correlated. Investing in either for the long term is an excellent decision.
Dave Chilton provides a very similar example in “The Wealthy Barber Returns.” Regarding the question, “should I put my savings into a retirement plan or use them to pay off debt?”, his answer is “yes and yes.” Both moves are great and you should get at it. It is important to not get caught up in the comparative numbers. The worst thing you can do is be indecisive and procrastinate.
When comparing similar things, we often notice the differences rather than the commonalities. When Apple released their iPhone 6s, they said that “the only thing that has changed is everything.” It had a new 12 megapixel, 4k camera, 3d touch, and the Apple A9 processor. But we seem to be blind to how similar the phone actually was to its predecessor, the iPhone 6, which had an 8 megapixel camera, fingerprint touch ID and an Apple A8 processor. I can make a phone call on both devices. I can text my friends on both devices. I can download apps from the app store on both devices. I can take a high-quality picture on both devices. Although 99% is the same, we focus on the 1% that is different.
I have been overwhelmed by the “Paradox of Choice” in the past. The more options that are available for similar things makes it way more difficult to make a decision. And after finally making decision, I tend to wonder if I would have been better off going with another option. This happened to me recently when getting a new credit card. Should I get a cash back card or a travel card? Should I get a card that has an annual fee and higher rewards, or one with no annual fee but less rewards? Should I get a card from the bank that I currently use? Visa or Mastercard? Because of the sheer number of options available to me, it took me months to make a decision even though the differences between my final options were trivial. Had I focused on the plethora of similarities, rather than the small number of differences, I would have been able to come to a decision earlier.
I’ve always been a seeker of the perfect plan. I need to do my best to realize that for many things in my life, good may be good enough. The worst thing I can do is postpone making an important decision.