TUESDAY JULY 14, 2009

"Cha-Chingo!"

One of the leading indicators of investment trends is the type of advertising that one sees in the leading financial media. And, usually, the onslaught of advertising indicates the trend is over!

 

Recently, there has been much debate about asset allocation and diversification. As the story goes, asset allocation strategies failed in the latest market sell-off and new methods must be found. There is no doubt that asset allocation models experienced significant losses in 2008, but I think it is a stretch to say they failed. Investors who maintained a balanced portfolio lost nearly 25% in 2008, but that is much better than the 37%+ loss of an all equity portfolio. At Alliance Bank, we continue to believe asset allocation modeling is the best, albeit imperfect, practice for the vast majority of investors. Most of the alternative investment strategies appear in one way or another to be market timing strategies. Many of these strategies are being advertised on CNBC.

 


In one ad, a trader declares “buy and hold” a dead strategy. Investors should buy his investment software instead. The trader claims to have traded $50,000 into a gazillion dollars with his strategy and then declares “Cha-Chingo!” Perhaps I am too old fashion, but I am not sure I want my money being managed by a guy who yells “Cha-Chingo!”


Similarly, advertisements for Gold trading strategies proliferate, exploiting the worst fears of investors. At Alliance, we certainly share some of the inflation concerns that make Gold a prudent investment. However, Gold is not a sure bet by any standard and can experience significant losses. The TV ads for home safes to store your personal gold holdings strike us as over the top. Perhaps it is an indication the gold trade is done!



 

For me, I’ll stick with my diversified portfolio. Cha-Chingo in the long-run!

POSTED AT 1899-12-30 16:49:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.