journalist query: "what do you think of acronym-based investment strategies?"

David_Snowball

Dear friends,

I was having a discussion with a very good reporter for a national publication who's doing an article (admittedly a lighter, fluffier piece than his usual work) on the proliferation of acronym-based investment strategies and products. He's thinking of BRICs, MINTS, CIVETs, PIGS and the like. He recognizes that these are mainly marketing constructs that started with some seed of investment insight. He was wondering how investors thought about these products and whether you, or folks you knew, used them in their portfolios or used them as broad guides for ideas to embrace or avoid.

I suggested that I post his question on the board for folks to consider with the following proviso, if you post a reply and he's intrigued by it, I'll also share the email associated with your account so that he can learn who you are and do a bit of follow-up.

Technically his questions are: "Do you think acronyms are a good/bad guide to investing? Why or why not?"

As ever,

David

Crash

The best acronym I can think of is the "Kiss" Principle: "Keep it simple, stupid!" Beyond that, when I see references to BRICs or PIIGs and such, I read further to find out and decide for myself whether the observations are on-point or just "noise." It's the difference between a coincidence and a true, deeper, WORTHWHILE connection that I'm looking for. Is there an actual link to reality here? Or is Item X a random connection? I read to learn, not to deceive myself, and do my best to be aware and filter out "confirmation bias." The "short answer" is YES, I'm apt to look at "acronym stuff," whatever it may be, but though it is in my investing recipe, it's a tiny sub-piece, akin to the amount of Louisiana Hot Sauce I put into my red Italian pasta sauce. More than a tiny bit of Hot Sauce, and it's not Italian anymore, as well as being too spicy to enjoy. Defeats the purpose.

There you go, David.

scott

I think people have to dive deeper than that. All of the acronyms are really broad ways to market broad ideas and concepts, and I think to some degree that works in a society that is increasingly looking for edible "snacks" of information and light reading versus real due diligence. In other words, in a "Twitter Nation", it's easy to build a concept and get headlines out of BRIC or whatever nonsense acronym, but the world - and investing - is so much more complicated and complex than that.

Speaking of due diligence, in a "Twitter Nation", people invest in a company that doesn't exist anymore that sounds like Twitter (Tweeter, http://www.reuters.com/article/2013/10/08/us-tweeter-symbol-idUSBRE99712Q20131008) because they didn't bother to do the bare basics of research. So, there's always going to be concepts that are easily marketed by catchy acronyms, but you really have to do the homework and try to separate the validity and long-term appeal (if any) of the concept versus the short-term hype.

People can get a BRIC index fund, but I think one of the most wonderful aspects of international investing is really digging into research and learning about other cultures or at the very least have an active manager and learning about some of the top holdings.

jlev

I look at them as useful ways of organizing investor behavior. If something is going on in the market that I don't understand from apparent fundamentals it often is correlated to people acting on acronym investment ideas. As an occasional teacher I find that acronyms that are catchy enough can define their own truths.

For my own investment process I look at them as ideas with kernels of truth, but whether or not that small kernel of truth is still relevant or useful for me varies widely. I agree with @scott that acronyms lend themselves to fads.

Ted

Alts, avoid them at all cost !
Regards,
Ted

JohnChisum

Perhaps these acronym investments serve a purpose for some but when I hear about a BRIC fund I think about a fund that is like the Dow compared to the SP500 index with relation to emerging markets.

Vert

IMHO, acronyms are the tools of the Devil.

But seriously, the only proper use for them is as a way of saving space and the effort of typing. Too often these days they're used gnostically (if that's a word) as a way to separate the enlightened who know what they mean from the great unwashed who don't. It's a small step from there to use acronyms to bilk the innocent out of their money.

Two guesses as to how Wall Street uses acronyms, and the first doesn't count.

jerry

A humorous article could be written about people who buy stocks because of their symbol. I own TV which has been an excellent investment, have owned MOO and TAN and considered owning POOL.

cman

Those acronyms have seemed like industry buzzwords rather than strategies or products to me.

Old_Skeet

They are no doubt designed as a marketing tool to catch investor attention for a certain class of packaged product. And, I guess to some extent they have succeeded. It now seems someone, in the press, wants to write a story about what investors might think about them and if they bought product because of them. From my thinking their success has to be measured not form investor thinking about the acronym itself; but, from the firms marketing success that coined the acronym. They did not affect my buying decisions although I think some of them are even right catchy.

Old_Skeet

ibartman

Re: Do you think acronyms are a good/bad guide to investing? Why or why not?

1. FOR THE INVESTOR

They are valuable, particularly if they are presented to the investor by a would-be salesman, who may or may not be posing as an 'advisor'. They are valuable because they provide the investor with an early warning that everything else the salesman will say is (at best) cr@p. They are valuable because they let the investor save his time and money by quickly hanging up on, or ending the conversation with, the 'advisor'/salesman.

2. FOR THE SALESMAN/'ADVISOR'

They are valuable, particularly when they are presented by the 'advisor' to a prospect who does not immediately hang up the phone or terminate the conversation. They let the salesman know that the prospect is someone of limited financial intelligence that will probably be an easy mark, for the acronym in question as well as other cr@p that the salesman may peddle in the future.

So.... I guess they are valuable guides to investors and advisors, for reasons as noted.

PRESSmUP

Such constructs are neither good, nor bad. They simply represent a form of shorthand to represent a broader idea. BRICs as an example....referenced a slice of foreign investment. Just because the term is used doesn't mean it's good, but it could lure someone not paying closer attention.

I suppose the use of acronyms and catchphrases unfortunately is "the new normal"....sorry, couldn't help myself.