Tuesday, October 21, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Best to avoid shiny new investments

sievers column sig

By
From page B9 | June 08, 2014 |

The global fashion industry is sometimes a good analogy to investing because much of the financial services industry works the same way. Fashion is fickle by nature, pushing and then pulling trends to keep hapless consumers forever turning over their wardrobes.

Fashion designers, manufacturers and media operate by telling consumers what’s in vogue this year, thus artificially creating demand where none previously existed. What turns up in the boutiques is hyped as hip by the glossy magazines to make you feel like you “must” buy it.

Likewise, much of the media and financial services industries depend on fleeting trends and built-in obsolescence to keep investors buying new “stuff.” The real needs of individuals do not drive this industry, rather the plan of manufacturers who want goods with short shelf lives.

Just as in fashion, many consumers jump onto an investment trend after it’s already peaked and the market has moved on to something else. So their portfolios can end up full of mismatched, costly, impractical creations such as hybrids, capital protected products and hedge funds.

These products tend to be created because they can sell. Early in 2005, Reuters wrote about how banks were manufacturing exotic credit derivatives (instruments designed to separate and transfer credit risk) for investors looking for ways to boost yield at a time of narrowing premiums over risk-free assets. Four years later, in the midst of the crisis caused partly by those same derivatives, the shiny new things were “guaranteed” or “capital protected” products as financial institutions rolled out a new line of merchandise they thought they could sell to a ready market.

Some investors made the mistake of swinging from one trend to the other, ending up with overly concentrated portfolios, like a fashion buyer with a wardrobe full of puffy blue shirts. While some of these investments may well have found a viable market, it’s worth asking whether the specific and long-term needs of individuals are best served by the design and mass marketing of products built around short-term trends.

Luckily, there is an alternative. Rather than investing according to what’s trendy at the moment, some people might prefer an approach based on long-term research and built upon principles that have been tried and tested in many market environments.

Instead of second guessing where the market might go next, this alternative approach involves working with the market, taking only those risks worth taking, holding a number of asset classes, keeping costs low, and managing one’s own emotions.

Instead of chasing returns like an anxious fashion victim, this approach involves investors trusting the market to offer the compensation owed to them for taking “systematic” risk, those risks in the market that can’t be diversified away.

Instead of juggling investment styles according to the fashion of the moment, this approach is based on dimensions of return in the market that have been shown by rigorous research as sensible, persistent and pervasive. Instead of blowing the wardrobe budget on the portfolio equivalent of leg warmers, this approach spreads risk across and within many different asset classes, sectors and countries through a technique called diversification.

Instead of paying top dollar for the popular brands at the expensive department stores, this approach focuses on securing good long-term investments at low prices relative to fundamental measures. Buying high just means your expected return is low.

Most importantly, instead of focusing on off-the-rack investments created by the industry based on what it thinks it can sell this week, this approach can help deliver long-term results based on each individual’s own needs, goals and life circumstances.

To paraphrase the legendary designer Coco Chanel, investment fashion changes, but style never goes out of fashion.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at mark@wealthmatters.com.

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Crime key topic again at Fairfield candidates night

By Ryan McCarthy | From Page: A5, 18 Comments | Gallery

 
 
Dixon corn maze breaks own world record

By Jess Sullivan | From Page: A5 | Gallery

PAL center seeks volunteers

By Jess Sullivan | From Page: A5, 1 Comment

 
Police Department hosts employee recognition event

By Jess Sullivan | From Page: A5

.

US / World

Police say they might have spotted ambush suspect

By The Associated Press | From Page: B2

 
Fashion designer Oscar de la Renta dies at 82

By The Associated Press | From Page: B2 | Gallery

Yosemite proposes raising entrance, camping fees

By The Associated Press | From Page: B2, 2 Comments

 
CDC releases revised Ebola gear guidelines

By The Associated Press | From Page: B2

Clinton: Midterm elections should motivate women

By The Associated Press | From Page: B2 | Gallery

 
Surfer fends off shark attack with fist, board

By The Associated Press | From Page: B2

WWII airman to be buried in Oakland

By The Associated Press | From Page: B2, 1 Comment

 
Brown: California needs long-term vision on water

By The Associated Press | From Page: B2, 4 Comments

Colorado proposes edible pot ban, then retreats

By The Associated Press | From Page: B2, 2 Comments

 
Submarine hunt sends Cold War chill across Baltic

By The Associated Press | From Page: B2

Oscar Pistorius to finally learn his sentence

By The Associated Press | From Page: B2

 
Youths, tech workers duel over San Francisco field

By The Associated Press | From Page: B2

Suspect in Va. abduction charged in DC area rape

By The Associated Press | From Page: B2

 
Warming Earth heading for hottest year on record

By The Associated Press | From Page: B2, 1 Comment

Lacking a plan, Abbas opts for rhetoric

By The Associated Press | From Page: B2 | Gallery

 
Police: Indiana suspect hints at more killings

By The Associated Press | From Page: B2 | Gallery

Turkey says it helps Kurdish fighters enter Syria

By The Associated Press | From Page: B2

 
Nigeria declared Ebola-free; ‘spectacular success’

By The Associated Press | From Page: B2 | Gallery

Urgent-care clinics ill-equipped to treat Ebola

By The Associated Press | From Page: B2

 
British royal couples’ 2nd child due in April

By The Associated Press | From Page: B2

 
.

Opinion

Spering kept youth league going

By Letter to the Editor | From Page: A11, 5 Comments

 
Day, Blankenchip good for respective cities

By Letter to the Editor | From Page: A11, 1 Comment

‘Misleading’ mailer sent to residents

By Letter to the Editor | From Page: A11

 
.

Living

Community Calendar: Oct. 21, 2014

By Susan Hiland | From Page:

 
.

Entertainment

Yearwood, Santana to perform at World Series

By The Associated Press | From Page: B6

 
Standing ovation at Met Opera despite protest

By The Associated Press | From Page: B6 | Gallery

Still the Same: Bob Seger launching tour, album

By The Associated Press | From Page: B6 | Gallery

 
San Francisco radio stations ban hit song ‘Royals’

By The Associated Press | From Page: B6

Pitbull to host American Music Awards on Nov. 23

By The Associated Press | From Page: B6

 
‘Buffy the Vampire Slayer’ actor arrested in Idaho

By The Associated Press | From Page: B6

NBC’s Snyderman faces credibility issues

By The Associated Press | From Page: B6 | Gallery

 
Not so fast cordcutters – cable’s not going anywhere

By The Associated Press | From Page: B5 | Gallery

TVGrid Oct 21

By Daily Republic Syndicated Content | From Page: A11

 
.

Sports

Local Report: Armijo boys soccer team falls to Vintage

By Daily Republic staff | From Page: B1

 
Steelers rally past stunned Texans 30-23

By The Associated Press | From Page: B1

Bumgarner against Shields in World Series opener

By The Associated Press | From Page: B1, 1 Comment | Gallery

 
Raiders plagued by 3rd-down defensive woes

By The Associated Press | From Page: B1 | Gallery

Champion drag racer Raymond Beadle dies at 70

By The Associated Press | From Page: B1

 
Stiviano lawsuit against Shelly Sterling dismissed

By The Associated Press | From Page: B1

With TD mark in bag, Manning can set more records

By The Associated Press | From Page: B1 | Gallery

 
49ers lose center Daniel Kilgore, needs surgery

By The Associated Press | From Page:

Giants-Royals: A capsule look at World Series

By The Associated Press | From Page: B1

 
Belichick, Brady praise Manning on TD record

By The Associated Press | From Page: B1

Penn State board to meet on disputed Freeh Report

By The Associated Press | From Page: B1

 
McIlroy to skip 2 events to focus on lawsuit

By The Associated Press | From Page: B1

Column: Keselowski marches to his own beat

By The Associated Press | From Page: B1 | Gallery

 
Wanted: Cities interested in hosting 2024 Olympics

By The Associated Press | From Page: B1

Giants rely on core of 4 relievers

By The Associated Press | From Page: B1

 
Royals, fans bond over improbable postseason run

By The Associated Press | From Page: B1

Voynov suspended on domestic violence suspicion

By The Associated Press | From Page:

 
.

Business

Facebook sues law firms, claims fraud

By The Associated Press | From Page: B5

 
Apple reports record 39.3 million iPhone sales

By The Associated Press | From Page: B5, 1 Comment

US regulator: Fannie, Freddie in deal with banks

By The Associated Press | From Page: B5

 
Sears plans to raise more cash via rights offering

By The Associated Press | From Page: B5

Survey: Pay raises rarer despite strong US hiring

By The Associated Press | From Page: B5 | Gallery

 
US agency warns car owners to get air bags fixed

By The Associated Press | From Page: B5

.

Obituaries

.

Comics

Pickles Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
Bridge Oct 21

By Daily Republic Syndicated Content | From Page: B7

Sudoku Oct 21

By Daily Republic Syndicated Content | From Page: B7

 
Baby Blues Oct 21

By Daily Republic Syndicated Content | From Page: B6

Sally Forth Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
Wizard of Id Oct 21

By Daily Republic Syndicated Content | From Page: B6

Dilbert Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
B.C. Oct 21

By Daily Republic Syndicated Content | From Page: B6

Crossword Oct 21

By Daily Republic Syndicated Content | From Page: B7

 
Frank and Ernest Oct 21

By Daily Republic Syndicated Content | From Page: B6

Blondie Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
Word Sleuth Oct 21

By Daily Republic Syndicated Content | From Page: B7

Garfield Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
Get Fuzzy Oct 21

By Daily Republic Syndicated Content | From Page: B6

Baldo Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
Rose is Rose Oct 21

By Daily Republic Syndicated Content | From Page: B6

For Better or Worse Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
Zits Oct 21

By Daily Republic Syndicated Content | From Page: B6

Peanuts Oct 21

By Daily Republic Syndicated Content | From Page: B6

 
Cryptoquote Oct 21

By Daily Republic Syndicated Content | From Page: B7

Beetle Bailey Oct 21

By Daily Republic Syndicated Content | From Page: B6