Analysis-Paralysis: The Rise To One Million Investment Choices

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by Tyler Durden
Wednesday, Jan 10, 2024 - 10:45 AM

By 2031, there could be one million managed investment products. As the number of investment choices grows, investors are suffering from analysis-paralysis.

Visual Capitalist partnered with Morningstar to show the rise in investment products over time, and how financial advisors can help.

Investment Product Growth Over Time

There were just over 30,000 managed investment products in 2002, but the choices grew rapidly in the years that followed. As of June 30, 2023, there were more than 742,000 products available.

Source: Morningstar, 2023 data is as of June 30. Managed products include closed end funds, collective investment trusts, exchange traded funds, global restricted funds, hedge funds, insurance product funds, models, open-end funds, separate accounts, UK LP subaccounts, VA subaccounts, and VL subaccounts.

In terms of the different product types, open-ended mutual funds are the most common. However, ETFs have seen the highest growth rate over the last two decades.

Growth rates for all managed products in total were the highest in the early 2000s, but the number of products has continued to grow in recent years. The projection of one million products by 2031 assumes the compound annual growth rate of 3.64% from 2017 to 2022 continues into the future.

Overcoming Decision Paralysis

People have access to more investment products and more advice than previous generations, but this doesn’t necessarily translate to more knowledge. Instead, this can lead to confusion and decision paralysis. In fact, 26% of people say they are uncomfortable making investment decisions, primarily due to a lack of knowledge.

Notably, investors don’t view advisors as being significantly more valuable than other information sources.

Source: Morningstar’s 2023 Voice of the Investor Study. The study is based on 2,003 U.S. adults who were not currently employed as a financial advisor.

However, the perceived value of advisors increases substantially once an investor begins working with one.

To help combat decision paralysis, advisors can provide actionable insights and curate options for investors. Want to learn more about today’s investors and their unique needs?

Download Morningstar’s Voice of the Investor report.