Keep Your Investments Simple, Because the Alternatives Could Be Worse

As reported by the New York Times (and linked through CNBC.com:  http://www.cnbc.com/id/100449551), retail investors are once again being burned by complex alternative investments.  This is an old story in the annals of investment busts.  The more complex an investment, the less likely a retail investor will understand it, and the greater the advantage an unscrupulous broker will have in foisting it on the unsuspecting.  What's troubling is that many of the victims weren't seeking a fast, speculative buck.  They were often conservative investors who were pushed by the Federal Reserve's scorched earth policy against interest rates to hunt in dark, dank thickets for elusive, ethereal positive yields.  Desperate for investment income, they fell victim to sales people saying what they wanted to hear, but maybe not what they needed to understand.

An underappreciated element of saving and investing is the need to manage risk.  Manage doesn't mean avoiding all risk, and it certainly doesn't mean seeing greater risk as the path to greater rewards.  It means understanding that risk and reward are linked, and that not getting too greedy about rewards is the way to long term success.  Some risk is reasonable, as long as you don't expose yourself to so much volatility that you grab the little paper bag in the seatback in front of you and put all your money in a mattress.  The tortoise beats the hare when it comes to investing.  Searching for quick returns is like donning wings of paraffin and flying toward the Sun.  Don't invest in anything that you don't understand--and that means having a full appreciation for every way your hmmmm can be deep fried.  Simple, steady and average are a decidedly better bet for making you comfortable in retirement than the latest in glam financial fashions.  For more, see http://blogger.uncleleosden.com/2009/11/techniques-for-retirement-saving.html.