Friday, August 22, 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

Chapkis Dance brings award-winning moves to Vacaville

By Amy Maginnis-Honey | From Page: B1 | Gallery

 
DA’s departure delays 2012 murder trial

By Jess Sullivan | From Page: A1, 1 Comment

Ducks on the pond, sturgeon in the water

By Ryan McCarthy | From Page: A1, 2 Comments | Gallery

 
Jazz invasion Aug. 30 at performing arts center

By Amy Maginnis-Honey | From Page: B1

 
Salsa star Domingo Quinones headlines Festival de la Isla

By Amy Maginnis-Honey | From Page: B1

 
Green Valley water users appeal court ruling

By Barry Eberling | From Page: A1

How I spent my summer vacation

By Tony Wade | From Page: A2

 
Small fire takes place at Solano College

By Barry Eberling | From Page: A3

 
Internet cafe measure goes before state Senate

By Ryan McCarthy | From Page: A3

Housing specialist to speak before Senior Rountable

By Ryan McCarthy | From Page: A3

 
Brown approves “dining with dogs” law

By Barry Eberling | From Page: A3

 
Fairfield police log: Aug. 20, 2014

By Susan Hiland | From Page: A12

 
Suisun City police log: Aug. 20, 2014

By Susan Hiland | From Page: A12

.

US / World

Aunt of toddler killed pleads not guilty

By The Associated Press | From Page: A3, 1 Comment

 
GPS devices find huge water loss in western US

By The Associated Press | From Page: A4

Cops greet students at school where plot thwarted

By The Associated Press | From Page: A4 | Gallery

 
San Francisco to tally bird-into-window death toll

By The Associated Press | From Page: A4

California plans aid to immigrant minors

By The Associated Press | From Page: A5 | Gallery

 
California to appeal ruling tossing death penalty

By The Associated Press | From Page: A5

Stunt blocks traffic on Golden Gate Bridge

By The Associated Press | From Page: A5

 
Bodies of 2 men found in adjacent California yards

By The Associated Press | From Page: A5

Assembly approves greater disclosure for campaigns

By The Associated Press | From Page: A5

 
No bail for woman in Amish girls’ kidnapping in NY

By The Associated Press | From Page: A6

Lawyer: Utah restaurant had other chemical burn

By The Associated Press | From Page: A6

 
Ice bucket challenge goes awry, firefighters hurt

By The Associated Press | From Page: A6

Marathon bombing suspect’s friend pleads guilty

By The Associated Press | From Page: A6

 
US judge strikes down Florida gay marriage ban

By The Associated Press | From Page: A6

Gov. Nixon taking National Guard out of Ferguson

By The Associated Press | From Page: A6

 
American Ebola doc: ‘I am thrilled to be alive’

By The Associated Press | From Page: A6

Russian aid convoy advances toward Ukraine

By The Associated Press | From Page: A10

 
Israel kills 3 Hamas military commanders in Gaza

By The Associated Press | From Page: A10

Turkey’s Davutoglu named new premier

By The Associated Press | From Page: A10

 
Thai army ruler named prime minister

By The Associated Press | From Page: A10

Indonesian court rejects election loser’s appeal

By The Associated Press | From Page: A10

 
Liberia gives food in slum sealed to stop Ebola

By The Associated Press | From Page: A10

Foley case lays bare debate over paying ransom

By The Associated Press | From Page: A10

 
Pentagon: Islamic State militants will regroup

By The Associated Press | From Page: A10

Syria opposition: Deadly chemical attack forgotten

By The Associated Press | From Page: A10

 
Record drought saps California honey production

By The Associated Press | From Page: A12 | Gallery

.

Opinion

Get it straight in Ferguson

By Bud Stevenson | From Page: A11

 
Question of the week: Does school start too soon?

By Daily Republic | From Page: A11

Editorial Cartoon: Aug. 22, 2014

By Daily Republic Syndicated Content | From Page: A11

 
Are America’s police over-militarized and under-accountable?

By Ben Boychuk and Joel Mathis | From Page: A11

 
Young men helped me, and I thank them

By Letter to the Editor | From Page: A11

.

Living

Today in History: Aug. 22, 2014

By The Associated Press | From Page: A2

 
Community Calendar: Aug. 22, 2014

By Susan Hiland | From Page: A2

My whole house shakes when my new neighbors drop their barbells

By Kathy Mitchell and Marcy Sugar | From Page: A9

 
Horoscopes: Aug. 22, 2014

By Holiday Mathis | From Page: A9

.

Entertainment

Week in preview Aug. 22-28, 2014

By Amy Maginnis-Honey | From Page: B1

 
The voice-overs can’t save ‘Sin City: A Dame to Kill For’

By Mcclatchy-Tribune News Service | From Page: B2

Review: A sweet Moretz rescues ‘If I Stay’

By The Associated Press | From Page: B2

 
Emmy hopefuls play the angles to nab trophies

By The Associated Press | From Page: B3

Seth Meyers prizes his new role as Emmycast host

By The Associated Press | From Page: B3

 
Entertainment calendar Aug. 22, 2014

By Susan Hiland | From Page: B4

Julianne Hough dances back to ‘Dancing’ as judge

By The Associated Press | From Page: B6

 
Jon Hamm hopes Ferguson will come out stronger

By The Associated Press | From Page: B6

Fade to black: Leonard Maltin ending movie guides

By The Associated Press | From Page: B6

 
‘Doctor Who’ returns with a new season on BBC America

By Mcclatchy-Tribune News Service | From Page: B6

TVGrid

By Daily Republic Syndicated Content | From Page: B6

 
.

Sports

Local boxers make weight and are ready to fight

By Marcus Lomtong | From Page: B7 | Gallery

 
Serena Williams to face Townsend in Open 1st round

By The Associated Press | From Page: B7

Loose sod at new Levi’s Stadium removed

By The Associated Press | From Page: B7 | Gallery

 
Raiders’ Woodson returning to Lambeau, faces Pack

By The Associated Press | From Page: B7 | Gallery

 
Tigers’ Price throws 1-hitter, loses to Rays 1-0

By The Associated Press | From Page: B8

Philly loses to Chicago in LLWS

By The Associated Press | From Page: B8 | Gallery

 
Ryu sets course record at Canadian Women’s Open

By The Associated Press | From Page: B8

McIlroy stumbles to 74, worst start in 2 months

By The Associated Press | From Page: B8 | Gallery

 
Cal interim AD Williams jumps into new role

By The Associated Press | From Page: B8

Phelps back in international comp, advances in 100

By The Associated Press | From Page: B8

 
Teams test out a new helmet, but does it work?

By The Associated Press | From Page: B10 | Gallery

Goalkeeper Tim Howard taking break from US team

By The Associated Press | From Page: B10

 
Signups for Friday, Aug. 22, 2014

By Paul Farmer | From Page: B10

.

Business

Big 2015 Chevy Tahoe remains a rare breed of SUV

By Ann M. Job | From Page: C1 | Gallery

 
United lures top fliers with promise of a hot meal

By The Associated Press | From Page: B11 | Gallery

Family Dollar rejects Dollar General offer

By The Associated Press | From Page: B11

 
S&P 500 closes at a record; Hewlett-Packard gains

By The Associated Press | From Page: B11

Ford recalling more than 160,000 vehicles

By The Associated Press | From Page: B11

 
Bank of America settlement likely to benefit few

By The Associated Press | From Page: B11

US housing recovery appears to be back on track

By The Associated Press | From Page: B11

 
Airline group forecasts uptick in Labor Day travel

By The Associated Press | From Page: B11

Applications for US unemployment aid fall to 298K

By The Associated Press | From Page: B11

 
.

Obituaries

Mary Louise Loveall

By Susan Hiland | From Page: A4

 
George ‘Wayne’ Hause

By Nancy Green | From Page: A4

Sharon Ilene Boyd

By Nancy Green | From Page: A4

 
Richard Ray Jr.

By Nancy Green | From Page: A4

.

Comics

For Better or Worse

By Daily Republic Syndicated Content | From Page: A8

 
Zits

By Daily Republic Syndicated Content | From Page: A8

Rose is Rose

By Daily Republic Syndicated Content | From Page: A8

 
Blondie

By Daily Republic Syndicated Content | From Page: A8

Garfield

By Daily Republic Syndicated Content | From Page: A8

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: A8

Get Fuzzy

By Daily Republic Syndicated Content | From Page: A8

 
Beetle Bailey

By Daily Republic Syndicated Content | From Page: A8

Wizard of Id

By Daily Republic Syndicated Content | From Page: A8

 
Baby Blues

By Daily Republic Syndicated Content | From Page: A8

Peanuts

By Daily Republic Syndicated Content | From Page: A8

 
Baldo

By Daily Republic Syndicated Content | From Page: A8

Pickles

By Daily Republic Syndicated Content | From Page: A8

 
Sally Forth

By Daily Republic Syndicated Content | From Page: A8

Dilbert

By Daily Republic Syndicated Content | From Page: A8

 
B.C.

By Daily Republic Syndicated Content | From Page: A8

Bridge

By Daily Republic Syndicated Content | From Page: A9

 
Crossword

By Daily Republic Syndicated Content | From Page: A9

Word Sleuth

By Daily Republic Syndicated Content | From Page: A9

 
Sudoku

By Daily Republic Syndicated Content | From Page: A9

Cryptoquote

By Daily Republic Syndicated Content | From Page: A9