I am by no means, the embodiment of a "foodie." However, I do love interesting food and will tend to venture towards the more unique dishes on a menu. The lobby restaurant of a hotel I recently stayed in had some enticing appetizers. One of these appetizers happened to be smoked ham hock nachos, with kalamata olives, pepperoncinis, and aged cheddar and Gouda cheeses. The very thought of passing up such a palatable opportunity would have been shameful. Needless to say, in a matter of minutes I found myself hovering over a smoky, cheesy mound of tortilla chips. Never before had I experienced such flavor and joy layered into a fried-corn byproduct!
In the midst of my euphoria I reviewed the menu again, trying to remind myself as to what city I had been placed. While doing so, I came across the same menu item I had just devoured, this time discovering the price of $20 on said nachos! Though this may sound like a plug for the righteous combination of pricey smoked meats and chips, there is apparently a financial lesson here.
Let's be honest, it seems as though the financial media continues to stress the importance of no-loads, low cost, investment options. Not always are low-to- no cost funds the answer. And the same is to be said of using a sales-loaded investment. To be sure, costs are an important part of investment returns over both long and short term objectives. But don't lose sight of logic and common sense. If I’m looking at two similar plates of smoked ham hock nachos, where one vendor is offering a six-hock plate for $16, and the other has a twelve-hock platter for $20 – I would personally go with the twelve hocks! The return on my nacho for the cost made sense to me! Ultimately, doesn’t that choice define most of consumerism?
We as the consumers, users, and purveyors of this world, have the responsibility to procure, analyze, and provide direction to each other in the most suitable and ethical manner we know. How we then use that information depends on what makes sense to us, as what seems logical to one person may be painted in an entirely different light to another.
Granted, if investors are knowledgeable and using proper allocations based on their objectives, risk tolerance, and - more importantly - can take the time to manage those accounts, these types of low-cost, no-charge funds can save in expenses. But that does not necessarily equate to better returns! These investments can possibly play an important part of a well-diversified portfolio, but they are not without risks and not always the answer. Alternatively, if managed appropriately and funds with a sales charge were used, the same returns could be gained while paying more in fees and costs. In essence, investments in the marketplace are filled with many variables, costs being only one. It is important to know what you are investing in, why you are investing, and who is helping in this process.
One thing is certain, there is very little pork or actual ham on a hock. The talk of fees, charges, and the costs thereof has promoted better awareness of retirement planning, investment options, and improved transparency. But remember, simple costs don't necessarily mean you should "short the pork." Don't let the talk of costs be an obstacle in finding solutions to your questions and plans. In order to generate enough meat for those nachos, it may make sense to smoke a few more hocks. The smoking process itself, if done properly, is very time intensive. To make what seems to be such a simple (yet delectable) dish requires time and an indeterminate number of hocks. The same is to be said of investing.
Best wishes to all as the familiar scent of charcoal, cooked meats, and singed knuckle-hair fills the summer air!
By Michael Poppen
Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. The investment products sold through LPL Financial are not insured Dupaco Community Credit Union deposits and are not NCUA insured. These products are not obligations of the Dupaco Community Credit Union and are not endorsed, recommended or guaranteed by Dupaco Community Credit Union or any government agency. The value of investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.