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Jerry Citarella: Which strategy is right for you?

Financial Truth

Posted: September 11, 2012 2:00 a.m.
Updated: September 11, 2012 2:00 a.m.

I had two meetings today, both relating to investment strategies. You wouldn’t believe how different they were. Ironically, each person assured me that the strategies were the best answer for my clients.

Both investment people told good, yet very different stories. Each supported their stories with statistics, history and examples. They both had nicely printed materials, convincing charts and even pens inscribed with their company’s name. They both sounded great when I heard them alone, but while reviewing them side by side, the question as usual was — “Who is right?”

I’ve been involved in financial services for more than 20 years and specifically in the world of overall financial planning, since 1995. I see at least one new strategy each month and occasionally I’ll see a few or even more. I won’t take the time to do the math, but that amounts to hundreds of stories; each of them convincing. How do we choose what’s best?

What concerns me is that I understand the stories and yet they’re still confusing. What does the do-it-yourselfer experience while exploring his options? I can’t imagine how confusing it must be to an inexperienced investor.

To fully understand one of the strategies being explained to me today, I literally had to squint my eyes, focus and draw on knowledge I rarely need to recall. This was a very involved process for screening and choosing investments. How those decisions are made are extremely complex as these strategies can also completely change entire portfolios as often as daily. The representatives for this company summarized the opportunity by saying that they like to stay in the “efficient frontier.” Do you understand what that means?

When it comes to choosing investment strategies, there are tons of choices. The first is whether to stick only to the most basic options or to explore more advanced options. I believe many people stick with basic options because the facts become overwhelming while trying to make more advanced decisions.

The question now is this: Are the more advanced decisions better or at least worth looking into? My answer is, many times they could be better or more appropriate, and yes, they are definitely worth looking into; especially during the extreme volatility we’ve been experiencing.

The first step in determining what’s right for you is to identify the appropriate options. The next step is to research and understand those options and lastly, to implement the most appropriate options effectively. Sounds easy right? Today, I heard about targeting the efficient frontier, the quantitative process technique known as returns-based style analysis and tactically adjusted leveraged index strategies. Still sound easy?

I don’t tell you this stuff to scare you. Quite to the contrary, I tell you this to raise your awareness about the need for knowledge and/or quality advice. There are hundreds, if not thousands of strategies that can be used for any dollars available for investing. There is also typically more than one strategy that makes sense to be used in conjunction with another. Things are changing regularly and there is no one-size-fits-all.

We live in a world of uncertainty and extreme volatility. Running and hiding is not the answer. The answers are sometimes complex. Which strategy is right for you? Do you know? Is it a traditional basic option, an insurance based option or a very strategic, advanced tactical option?

If you don’t understand the options you can’t make a good decision. Realize and accept your personal limitations. Once you do, you can find the information or help you need and discover … which strategy is right for you!

Jerry Citarella is the owner of Infinity Wealth Management 23734 Valencia Blvd., Suite 301, Valencia, (661) 255-9555, ext. 11. He is also the author of The Truth Helps Series of financial planning books. Mr. Citarella’s column reflects his own views and not necessarily those of The Signal. Submit questions to: Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Infinity Wealth Management is not an affiliate of NEXT Financial Group Inc.


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