The Paradox of Choice: Why Fewer Investment Options Lead to Better Results

I am going to tell you about the dumbest spreadsheet I ever built.

It was a Sunday afternoon in early 2020, and I had decided this was the week I would finally build the perfect investment portfolio. I opened a fresh Google Sheet, created seven tabs – one for each ETF I was considering – and started comparing everything. MERs. Geographic allocations. Sector weightings. Dividend yields. Tracking error. Currency hedging. Historical returns over 1, 3, 5, and 10-year periods.

I had columns for XIC, XUU, XEF, XEC, ZAG, VUN, and VIU. I was trying to find the exact right percentage for each fund. Should it be 25% Canadian and 45% US, or 20% Canadian and 50% US? What about international developed markets – 15% or 20%? And should I include emerging markets at all, or was that just adding complexity for a marginal benefit?

I adjusted allocations by 0.5% increments. I built formulas that calculated blended MERs down to three decimal places. I colour-coded cells based on which combinations had the lowest historical volatility. I was genuinely proud of this spreadsheet. It was a work of art.

And then I did not invest for three months.

Not because I ran out of money. Not because the market scared me. But because I could not decide. Every time I sat down to finally pull the trigger, I would notice something that made me hesitate. Maybe I should swap VUN for VFV to save 0.03% on the MER. Maybe I should add a small-cap tilt. Maybe I should read one more Canadian Couch Potato article.

Three months of paralysis. Three months of my money sitting in a savings account earning next to nothing while the global equity market did its thing without me.

Then a friend mentioned XEQT. One fund. One purchase. Global diversification. Automatic rebalancing. I bought it in five minutes and have never looked back.

That spreadsheet? I deleted it. Best financial decision I ever made – and it had nothing to do with fees, allocations, or asset classes. It had everything to do with removing choice from the equation.

1. The Jam Study That Changed How We Think About Choice

In 2000, psychologist Sheena Iyengar and her colleague Mark Lepper ran an experiment that would fundamentally change how we understand human decision-making. The setup was simple: a tasting booth at an upscale grocery store in Menlo Park, California, offering samples of exotic jams.

On some days, the booth displayed 24 varieties of jam. On other days, it displayed only 6 varieties.

The results were striking:

• The large display (24 jams) attracted more people to stop and look – about 60% of passersby versus 40% for the small display
• But when it came to actually buying jam, the numbers flipped dramatically
• 30% of people who saw the small display bought a jar
• Only 3% of people who saw the large display bought one

Read that again. People were ten times more likely to make a purchase when they had fewer options to choose from.

This study became the centrepiece of psychologist Barry Schwartz’s influential book The Paradox of Choice: Why More Is Less. Schwartz argued that there is a tipping point beyond which additional options stop being helpful and start being harmful. Past that tipping point, more options lead to:

• Paralysis – the inability to choose at all
• Reduced satisfaction – even when you do choose, you wonder if you chose correctly
• Regret anticipation – the fear of regretting your choice prevents you from committing
• Elevated expectations – with so many options, anything less than “perfect” feels like failure

Sound familiar? If you have ever spent weeks comparing ETFs or agonizing over the difference between XEQT and VEQT, you have experienced exactly what Schwartz describes. And investing might be the domain where this effect hits hardest.

2. The Canadian ETF Explosion

Here is a number that should make you uncomfortable: there are now over 1,000 ETFs listed on the TSX.

Let that sink in. One thousand exchange-traded funds, all competing for your attention and your money. Ten years ago, that number was closer to 300. Twenty years ago, ETFs were barely a category in Canada. The growth has been exponential, and it shows no signs of slowing down.

Every year, asset managers launch new products targeting narrower niches. AI ETFs. Covered call ETFs. Cryptocurrency ETFs. ESG ETFs. Carbon credit ETFs. Single-country emerging market ETFs. The creativity is endless – and from a marketing perspective, that is the point.

But here is what the data actually shows:

The industry creates a thousand products. The evidence says you need one. That gap is not a service to investors – it is a source of confusion, paralysis, and poor decision-making.

Asset-weighted data confirms this. Despite the explosion in product launches, the majority of new ETF money flows into a handful of broad, simple, low-cost products. Funds like XEQT, VEQT, VGRO, and XGRO dominate inflows year after year. The market is telling you something: simpler is better, and most people know it deep down.

The problem is that knowing it and acting on it are two different things. When you open a brokerage app and see hundreds of ETFs, that knowledge gets buried under the noise. As I wrote about in analysis paralysis and XEQT, the sheer volume of options triggers a psychological response that is extremely hard to override with logic alone.

3. How Choice Overload Hurts Your Portfolio

The paradox of choice does not just cause a vague sense of unease. It causes specific, measurable damage to your financial outcomes. Here are the four main ways it shows up in real portfolios.

Analysis Paralysis: Never Starting

This is the most obvious and most costly version. You want to invest. You know you should invest. But with so many options available, you cannot decide what to buy, so you buy nothing.

I hear from readers all the time who have been “researching” for six months, a year, sometimes longer. They have compared dozens of ETFs, read hundreds of articles, watched countless YouTube videos, and they still have not invested a single dollar. Meanwhile, the market has moved on without them.

Real-world example: A reader emailed me last year saying she had $40,000 sitting in a high-interest savings account earning 3.5% while she tried to decide between a three-fund portfolio and an all-in-one ETF. She had been deliberating for fourteen months. In that time, a simple XEQT investment would have returned roughly 12%. That is nearly $5,000 in missed gains – not because she made a bad investment, but because she made no investment at all.

I covered the full cost of this kind of delay in my post on the real cost of waiting to invest.

Constant Second-Guessing: Performance Chasing

Even after you choose, the presence of alternatives keeps undermining your confidence. You bought XEQT, but you notice that VFV (S&P 500) is up 18% this year while XEQT is up 12%. Should you have just gone all-in on the US market? Maybe you should switch.

Performance chasing is the single most destructive investor behaviour, and it is directly fueled by having too many options to compare against. Dalbar’s annual Quantitative Analysis of Investor Behavior consistently shows that the average equity fund investor underperforms the market by 3-4% annually, largely because of poorly timed switches between funds.

Real-world example: In 2023 and 2024, when US tech stocks were on a tear, I saw countless posts on Reddit from Canadian investors who sold their globally diversified portfolios to go all-in on VFV or QQC. They were chasing the hot trend. Some of them will get burned when the cycle turns – because it always turns.

Portfolio Complexity Creep: Adding Funds That Overlap

This one is subtle. You start with a reasonable portfolio – maybe XEQT or a simple three-fund setup. Then you read about small-cap value and add that ETF. Then Canadian dividend stocks. Then REITs.

Before you know it, you own eight funds, several of which overlap significantly. Your “diversified” portfolio is a complicated mess that is harder to manage, harder to understand, and likely no better than the simple portfolio you started with.

Real-world example: I once helped a friend audit his portfolio. He owned 11 different ETFs. When we mapped out the underlying holdings, he had triple-counted his Apple and Microsoft exposure – those stocks appeared in his US total market fund, his tech sector fund, AND his global fund. He was paying three sets of fees to own the same stocks three times.

The Rebalancing Burden: More Funds, More Work

Every fund you add to your portfolio is a fund you need to monitor, evaluate, and rebalance. A one-fund portfolio like XEQT rebalances itself automatically. A seven-fund portfolio requires you to manually check allocations, calculate how much to buy or sell in each fund, potentially trigger taxable events, and remember to do it all over again in three to six months.

Real-world example: I used to rebalance a five-fund portfolio quarterly. It took about two hours each time – eight hours a year spent on portfolio maintenance that produced no measurable improvement over what XEQT does on its own, for free, without my involvement. As I explored in decision fatigue and investing, every one of those sessions drained mental energy I could have spent on literally anything else.

4. The Hidden Cost of “Optimizing”

Let me paint two pictures.

Investor A spends six months comparing XEQT, VEQT, and a custom five-fund portfolio. She calculates blended MERs, runs backtests, and debates currency hedging. After six months, she builds a carefully optimized five-ETF portfolio with a blended MER of 0.15% – a savings of 0.05% over XEQT’s 0.20% MER.

Investor B hears about XEQT, spends an afternoon reading about it, decides it is good enough, and invests her $50,000 on day one.

Here is what the math looks like after one year, assuming an 8% average annual return:

Investor A saved $30 in fees and lost over $2,000 in returns. That is not optimization. That is a catastrophic trade-off disguised as diligence.

This gap only widens with time, because those missed returns compound. The 0.05% fee difference between XEQT and a “perfect” custom portfolio amounts to $25 per year on a $50,000 portfolio. The cost of delaying that investment by six months to find that savings? Roughly 80 times larger.

This is the hidden cost of optimizing. You are not saving money. You are spending time and mental energy to lose money.

5. Why One Fund Is Not “Lazy” – It Is Sophisticated

I hear this objection constantly. “Owning just one ETF seems too simple. Should I not be doing more?”

No. And here is why.

When you buy a single share of XEQT, you are purchasing ownership in over 9,000 individual stocks spread across 49 countries. You own shares of Apple in the United States, LVMH in France, Toyota in Japan, Samsung in South Korea, and thousands of mid-cap and small-cap companies you have never heard of but that collectively drive global economic growth.

Here is what XEQT does for you automatically:

• Geographic diversification across North America, Europe, Asia-Pacific, and emerging markets
• Sector diversification across technology, financials, healthcare, industrials, energy, consumer goods, and more
• Automatic rebalancing – when one region outperforms, BlackRock trims it back and reinvests in underperforming regions, buying low and selling high on your behalf
• Institutional-grade portfolio construction designed by teams of quantitative analysts at the world’s largest asset manager
• Currency diversification across Canadian dollars, US dollars, euros, yen, pounds, and dozens of other currencies

This is not a lazy investment. It is the distillation of modern portfolio theory into a single product – the result of decades of academic research showing that broad diversification, low costs, and systematic rebalancing are the most reliable path to long-term wealth.

Do you know who else uses index strategies? The largest institutional investors in the world. Pension funds managing billions of dollars. Sovereign wealth funds. University endowments. They do not pick stocks. They build diversified portfolios and let the market do the heavy lifting. XEQT lets you do exactly the same thing.

And then there is Warren Buffett. He bet a million dollars that an S&P 500 index fund would outperform a basket of hedge funds over a decade – and he won, decisively. If the world’s greatest stock picker says most people should just buy an index fund, maybe we should listen.

Choosing simplicity is not admitting defeat. It is recognizing that the game of portfolio optimization has a negative expected value for individual investors.

I covered the full breakdown of what you actually own inside XEQT in my post on XEQT holdings.

6. The Freedom of Having Less to Decide

Here is something that nobody talks about when they discuss investment strategy: the psychological weight of ongoing portfolio management.

When you own a multi-fund portfolio, a steady stream of questions follows you around:

• Should I rebalance this quarter?
• Is my allocation still right, or has the market shifted enough to warrant changes?
• That new thematic ETF looks interesting – should I add a 5% position?
• The US market is outperforming everything – should I tilt more towards the S&P 500?
• Interest rates are changing – do I need to adjust my bond allocation?
• My Canadian stocks are dragging – should I reduce my home bias?

Each of these questions feels important. Each one demands research, analysis, and a decision. And each decision drains a little more of your finite mental energy – the same phenomenon I explored in decision fatigue and investing.

When you own just XEQT, every single one of those questions disappears.

Should you rebalance? No – XEQT rebalances itself. Is your allocation right? Yes – it is professionally managed by BlackRock. Should you add that hot new ETF? No – you already own the entire global market. Should you tilt towards the US? No – XEQT already has roughly 47% US exposure. Interest rates are changing? XEQT adjusts automatically. Canadian stocks dragging? Your global diversification handles it.

The mental freedom is extraordinary. I do not check my portfolio more than once a quarter. I do not agonize over allocation percentages. I do not wonder if I am “doing it right.” And that freed-up mental energy goes to my career, my relationships, and my health – things that matter far more than shaving 0.02% off my expense ratio.

The best portfolio is not the one with the highest theoretical return. It is the one that lets you live your life without constantly worrying about money. XEQT gives you that.

7. How to Break Free from Optimization Addiction

If you are reading this and recognizing yourself – the spreadsheets, the comparison articles, the Reddit debates, the perpetual “research phase” – here is your action plan. I am giving you permission to stop optimizing and start investing.

Step 1: Delete the Spreadsheet

I am serious. Close it. Delete it. If you have been building an elaborate ETF comparison document, it is not helping you. It is a security blanket disguised as due diligence. The marginal differences between the top ETF options in Canada are so small that they are meaningless over a 20-year horizon. Your spreadsheet is costing you more in delayed investing than it could ever save you in fee optimization.

Step 2: Pick XEQT and Move On

You do not need to compare XEQT to VEQT. You do not need to debate whether a five-fund portfolio is theoretically superior. You need to make a decision and start investing today. XEQT is a globally diversified, automatically rebalancing, institutionally designed, low-cost equity portfolio. It is not perfect. Nothing is. But it is more than good enough to build life-changing wealth over time.

Step 3: Set Up Automatic Investing

This is the most important step. Once you have bought XEQT, set up an automatic contribution – weekly, biweekly, or monthly, whatever matches your pay schedule. On Wealthsimple, this takes about two minutes. Automatic investing removes the biggest remaining decision point: “how much should I invest this month, and when?”

The answer becomes: the same amount, on the same schedule, every single time. No decisions required.

Step 4: Unsubscribe from the Noise

Unsubscribe from ETF comparison newsletters. Stop reading “best ETFs for 2026” articles. Leave the Reddit threads about whether XEQT or VEQT is 0.01% better. Unfollow the finance influencers who post daily about portfolio “optimization.”

This content exists to generate clicks and ad revenue, not to improve your returns.

Step 5: Check Your Portfolio Quarterly at Most

You do not need to look at your portfolio every day or even every month. Set a calendar reminder for once per quarter. Open the app, confirm your automatic investments are running, glance at the balance, and close the app. That is it.

The “Good Enough” Portfolio You Stick With Beats the “Perfect” Portfolio You Never Build

This is the single most important sentence in this entire post. Read it again.

I have seen it play out dozens of times. The investor who buys XEQT and contributes automatically for ten years will almost certainly end up wealthier than the investor who spends years searching for the “optimal” allocation, tinkers with their portfolio quarterly, and second-guesses every decision along the way.

Not because XEQT is magic. But because consistency beats optimization, and simplicity enables consistency. You cannot stick with a strategy that constantly demands your attention, your research, and your decision-making energy. You can stick with a strategy that runs on autopilot.

8. The Best Investment Strategy Is the One You Will Actually Follow

I want to end with something that took me years to understand.

There is no objectively “best” investment portfolio. Academics can argue about factor tilts and the efficient frontier until the end of time. But in the real world – where you have a job, a family, stress, emotions, and finite willpower – the best portfolio is the one you will actually stick with through decades of market turbulence and shiny new investment products.

And the portfolio you will stick with is the simple one. Not because simple portfolios have higher expected returns. But because they remove the friction, the doubt, and the decision fatigue that cause real investors to make real mistakes with real money.

Barry Schwartz was right. More choice does not make us better off. The jam study is not just a cute anecdote about grocery shopping – it is a fundamental insight into human psychology that applies directly to how we invest.

There are over 1,000 ETFs on the TSX. You need one.

XEQT is not the only good choice. But it is a good choice. And making a good choice today will always beat making the perfect choice someday.

Stop comparing. Stop optimizing. Open an account, buy XEQT, set up automatic contributions, and go live your life. Your future self will thank you – not for finding the lowest MER, but for having the wisdom to start and the discipline to keep it simple.

That spreadsheet I told you about at the beginning? Deleting it was the best financial decision I ever made. Not because the information was wrong, but because the pursuit of perfection was the enemy of progress.

Your move.