Cut the clutter: The art of subtraction to simplify your personal finance

livemint.com:

Whether routine or specific situations, our default response as humans is to add rather than subtract. Adding more clothes to wardrobe, more tasks in to-do list, more gadgets for convenience, more corporate meets to resolve issues. Addition is more intuitive and simpler, while subtraction takes some effort to think or reason. This tendency also extends to personal finance decisions.

A common refrain among investors is: I have invested in equities, mutual funds, FDs, bonds, post office schemes, sovereign gold bond scheme, LIC policy, property. Aur naya kya hai?’ (What else is new?)

The plethora of options available today, the dollops of information bombarded every second on social media, and the single-minded pursuit of returns often leave investors in a frenzy and curious to explore new investment products.

As a result, they often lose sight of their holistic asset allocation picture, which matters more. Investors fail to understand that their money is broadly going in the four asset classes—debt, equity, gold, and real estate—irrespective of the manner in which the products are packaged.

Also Read: Plan to invest directly in bonds? Beware these risks or you could lose it all.

Frequently adding new products to the portfolio is the outcome of a haphazard investment approach which does not meaningfully impact an investor’s financial life in the long run. Such mindless excesses increase the chances of over-diversification and overlaps in the portfolio.

“Less is only more where more is no good!" is a popular quote by Frank Lloyd.

Here are a few intriguing questions to elucidate this:

The answers lie in these questions itself.

Furthermore, if investments are too many and scattered, they become cumbersome to manage and track.