MarketWatch featured an interesting article called “Too Good To Be True.” Let’s look at some highlights:
When consumers get defensive about their money, the financial services industry goes on the offensive.
And there may never be a time where the business seems more offensive than it does now.
Coming off monster losses where seemingly every investment strategy either failed or was lucky to break even, financial firms know that investors are jaded.
So they’ve stepped up their training on how to get consumers past “No” and convince otherwise cautious folks to consider making an investment. Everyone is concerned about their next move, but some people dance to their own drummer while others take dancing lessons in the hopes of improving footwork.
For years, sales-training firms in the financial business have sent me promotional materials for their seminars, but the traffic has surged in hard times. Just last week, there was a Webinar promising to tell sales staff “how to get beyond the excuses people make to stop investing.” This week, the seminar being pitched is all about overcoming the three big objections consumers have to certain investment products.
Interestingly, the consumers’ top reason for not investing, apparently, was not “the financial services business has shown an alarming inability to make money for me over the last couple of years.”
In fact, in talking to one trainer — who asked not to be named or to have his company identified — it’s clear that recent disappointments are no obstacle to the new salesman, because your bad experience was “working with other guys, and we have new and better ideas.”
Consumers should hold onto their worries. There are plenty of good reasons not to fall victim to the next sales pitch, or to at least make sure you’re not a victim of sales-seminar thinking.
If you believe the seminar hype, the three big objections to investing in today’s uncertain economy are:
1. I don’t want to tie up my money.
2. What if I have an emergency (or lose my job, or get sick, or die)?
3. I think I’m going to wait until … (the market is better, my job appears safer, the economy is more solid, I get my kid through college, I pay down debts, I have more confidence).
The financial services industry is coming at you with all types of financial products in an attempt to get past your objections. They’ll sell you investments with limited or no surrender charges — to get beyond the fear that your money is tied up or unavailable in emergencies. They’ll show you charts and statistics about the cost of investing. Name a concern, they can beat it back, although your freedom and peace of mind may come with additional costs.
That’s why you may not want to eat what’s being cooked up for you, no matter how tempting it smells. This story could have been written back in 2002 when investors got hit with heavy markets losses for the first time this century. Now that the bear struck again in 2008, the stories and sales pitches are the same. Remember, Wall Street’s armies of commissioned salesmen are like pigs at a trough. The pigs may change, but the food is always the same. My reply to this issue still is what it was back in 2002. Stay away from commissioned salesmen whose only objective is to fill their pockets and not yours. And before doing business with anybody, ask the all important question, which I have pounded on for years: What is your exit strategy? If they don’t have one, take that as confirmation that the food about to be served to you is indeed the same.
[Emphasis added]
Comments 6
Ulli, this is so true. My past financial advisor was so into buy & "hope", it was like pulling teeth to get out of any of his recommended funds. I am no longer with his company and now feel much more secure, relaxed and safe with your philosophy. Thanks for all your help!
Same here. I left my adviser and his "buy and hold" strategy.
Adapted your style of analysis. Now buy only ETFs, and only the ones showing a buy signal against 50 and 200 MDA. Sometimes look at other time frames. Stop sell limit on every one.
I have to agree with you on this post. I do however have a question for you?
Why would anyone even be invested in this Market (even in the "Simple Income Hedge" you promote)?
As we both know hedging can work both ways. As an example most of your investors accounts went down 1% percent over the past 10 days while the Stock Market rallied 10 percent.
Per my Friend William Ferree "Hedging / selling short in an attempt to make money during a Market down turn is not recommend. It is better to be out of the Market all together"
Ulli,
Can you explain in simple Laymen terms how your Clients in your "Simple Hedge" method will ever make money.
Is there not a 50 / 50 chance the Hedge will loose more money than the off setting Securities gain?
Also why is your recommendation on your site Web page recommending to sell all "Short Positions (BEARX)" but you keep this same Position in your Clients Portfolio's.
Hedging appears to be a remarkably easy way to be in the Market and gain and lose nothing if your lucky.
Anon,
Hmm, the trend is up, which is why we are in the market; that's what trend tracking is all about.
The hedge works fine over time when it is rebalanced properly. Please see the StatSheet section on the subject.
lli…
Anon 2:
When the hedge is properly rebalanced as shown in section 7 of the StatSheet, it can produce nice returns over time. It's not a short-term trading vehicle.
BEARX as a straight short position is a sell, but not when it's part of the hedge strategy. If you send me an email, I can send you a table showing how the hedge has done in the past. It's not a short-term proposition.
Ulli…