Spoilt for choice — or spoiled outcomes?
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Spoilt for choice — or spoiled outcomes?

Dec 2022
Sep 2021
Investments and retirement planning: Spoilt for choice or spoiled outcomes?

Simple, low-cost options help retail investors take more control of investments, but a huge array of products, strategies, approaches can lead to poor results.

The original version of this article first appeared in The Business Times.

We live in a world where we have a dizzying array of choices. The number of shows to watch on Netflix or Disney+, new music to explore on Spotify, the number of game apps on our phones — all vie for our limited bandwidth. There is also a plethora of choices for financial services, payment apps, and investing options.

Spoilt for choice when it comes to investing?

Alvin Toffler first introduced the term "overchoice" or choice overload. This is a cognitive impairment in which people have a difficult time making a decision when faced with too many options. When people have no choice, it results in very low satisfaction. Interestingly, having more choices initially leads to more satisfaction, but as the number of choices increases, satisfaction then peaks and people tend to feel more pressure, confusion and potentially dissatisfaction with their choice. In other words, the level of satisfaction when plotted against the number of options available has a U-shaped curve.

In the book, The Paradox of Choice: Why More is Less, Barry Schwartz demonstrates how the dramatic explosion of choice — from mundane matters to the profound challenges of balancing career, family, and individual needs — has paradoxically become a problem instead of a solution, and how our obsession with choice encourages us to seek that which makes us feel worse. He argues that eliminating consumer choices can greatly reduce anxiety for shoppers, for example.

It's the same when it comes to financial decisions and investing. The plethora of options available in saving and investing has conditioned us to seek more choice. But when it comes to investing, too much choice often can be a bad thing when it leads to decision paralysis or worse — bad decisions that lead to poor outcomes and poor returns.

Do we really even have a choice?

In fact, many Singaporeans struggle with navigating through the many financial decisions that they have to make. The sandwich generation, in particular, faces some important choices. They worry about their career choices which influences their future income path. At the same time, they juggle their own living and housing expenses, children's expenses, and elderly parents' retirement needs and healthcare costs. Do they even have a choice when there is so much pulling at them from so many directions?

The answer is that there still is room for important decisions, especially as we stretch out the time frame in making those decisions. We talk about time decay of money, but there is clearly a time benefit to being long-term focused when it comes to investing, including the benefits of compounding.

The paradox of choice is leading Singaporeans to make immediate, reactive financial decisions over longer-term, strategic ones. According to a survey by AIA, young parents are almost three times more likely to spend on their immediate children's wants and needs (20%) over their own retirement planning (7%).

As immediate needs are prioritised, longer-term financial plans fall lower in priority. We recently published the Endowus Retirement Report to understand Singaporean attitudes towards the generational challenge of retirement and the role that CPF monies play in building a retirement lifestyle.

The 2021 report showed that 45% of Singaporeans have not planned for retirement, and while many of them are aware of the many uses of CPF, they do not actively plan or use CPF in these ways. Considering that retirement is the single biggest generational challenge we face as a society, more needs to be done by both individuals and financial service providers to bridge this gap. CPF remains an important pillar for both accumulating savings and providing various options including investments to build assets for the future.

Bar graph: Singaporeans' awareness and intentions to use their CPF
Source: Endowus Retirement Report 2021

Lack of choices signal poor financial status

On the flip side, when it comes to getting the right advice and accessing the best products to help make these decisions, the reality is that unless you are an accredited professional investor or have so much money that you get special access to private banking services, there is often a lack of options available to the common individual retail investor.

You may be forced into an uncomfortable situation where you have to take whatever is offered to you by the bank or broker or insurance agents — often at a high cost. Many of the older generation have been poorly served by the financial sector and, in turn, have opted for the intuitive investment choice: residential property.

Asset-rich, cash-poor Singaporeans are a growing subset of Singapore's ageing population that have accumulated the bulk of their wealth in property investment, but do not have sufficient liquid assets for their retirement expenses. Many of these Singaporeans are part of the Merdeka Generation — born in the 1950s who have been part of Singapore's growth story, and have accumulated wealth through their residential property.

There are a few schemes that can help tackle their retirement adequacy challenge, such as the HDB lease buyback schemes or bank home equity income loans to monetise their assets. While these options offer a critical lifeline to cash-strapped retirees, they come at a cost of having to give up ownership or accepting a very high interest cost. This predicament was definitely not desired or planned for by retirees who had hoped to pass on their homes as an asset to the next generation.

Being intentional about the choices we make

Younger Singaporeans, especially those in the sandwich generation, should prioritise planning for longer-term financial goals, even if the need is not immediate. Investing has never been more convenient and cost-effective, and you can get going earlier by starting with less now than previously possible.

Pie charts: Confidence of Singaporeans in having sufficient money for retirement
Source: Endowus Retirement Report 2021

For the Merdeka Generation, investments previously had to be tracked through Teletext, executed over the phone with a broker, and the only way to access global markets was through expensive funds.

Younger and older Singaporeans alike now have the luxury of choice through online platforms that allow investments of lower denominations with personalised advice and an automated investing process, all on a convenient mobile app.

We can also choose to educate ourselves to be better. There is greater access to financial information from both financial institutions and independent sources now. Education is critical to improving financial literacy and it is encouraging to see more programmes, education institutes and bloggers leading the charge here.

But this is not just for the young. Even if you are in your 50s and 60s, educating yourself to be better prepared is critical as Singapore's life expectancy is reaching the high 80s on average. This means more than half of the population will live well beyond those years. It's scary to think of a reality where half of the population are retired and living below their desired standard of living.

While the many surveys sometimes create a daunting picture of the future, being intentional about the choices we make when it comes to our financial matters and investing means we can take greater responsibility and ownership in securing our financial future together.

So is being spoilt for choice a benefit or a burden when it comes to investing? Well, it depends on where in the process that excess choice occurs. The availability today of simple, low-cost options to help the typically underserved-yet-overcharged retail investor take more control is certainly a welcome change for the industry.

But the overwhelming array of investment products, strategies and approaches can lead to poor results without the right level of professional advice and guidance. In the end, we each need to strike the right balance to achieve the best results and allow us to refocus our attention on what really matters — to secure our financial future.

Explore our Fin.Lit Academy to pick up tips on investing, wealth building, personal finance, CPF and SRS, and retirement planning. Take charge of your CPF investments with Endowus.

Our MAS-licensed client advisors are here to help — from walking you through the Endowus platform, to advising you on your individual wealth management needs — so you can achieve your goals. To reach out to our advisors, simply schedule an advisory call here.


Investment involves risk. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Past performance is not an indicator nor a guarantee of future performance. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund. 

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endowus Singapore Pte. Ltd. (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

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