Generally speaking, we live in a society where people value choice and the general attitude is that the more choice, the better. Thats apparent when you walk down the bread aisle in the grocery store. How many different ways can you package enriched wheat flour and high fructose corn syrup? Those commercials on TV advertising a particular phone service are funny. A guy sits around a table with a group of children and their responses are filmed after baiting them with questions like, which is better more or less? Of course the kids scream out in unison that more is better. The problem is that despite our cultural biases, more is not always better.
This is very apparent in the number of investment options offered under a retirement plan. Studies have shown that too many choices for plan participants can be overwhelming and lead to analysis paralysis. In one often cited study, the University of Pennsylvania Wharton School Pension Research Council Working Paper 2003-10, it shows declining participation rates when there are more investment option choices, with a precipitous drop in participation rates when choices number thirty or more. With too many choices, the net result is that participants make poorer choices, or simply make no choice.
