Dig out your Wheat Chex decoder ring

Many moons ago, Wheat Chex, then made by Ralston, included a Decoder Ring in their boxes of cereal (which went with the Secret Message Watch found in Corn Chex and the Invisible Ink Pen included in the Rice Chex boxes –ahh, to eating simple cereal in the 1960’s…). Some days, as I work in this industry, I long for a Decoder Ring to help remind me what the various acronyms we throw around mean. Aside from the medical field, the world of finance might be the most egregious in using terms designed to make the average person’s eyes glaze over.

At the beginning of the Aughts, we were encouraged to consider adding a BRIC (Brazil, Russia, India and China) component to our portfolios. In 2010, BRIC became BRICS with the addition of South Africa.  The theory of BRICS was that these countries would change their political systems to embrace capitalism and by investing in a BRICS Exchange-Traded Fund (ETF) you would be helping the country along that path. As we sit here in 2023, this seems like one of those quaint ideas that people smile and shake their heads while saying “bless their hearts” (and anyone who has lived in the South knows that this phrase isn’t the “blessing” that it appears to be…). A quick review finds that Brazil is the only country that is still holding to the original philosophy of that progress premise and that’s saying something if we’re holding Brazil up as an example of progress.

With the Golden Decade we found ourselves talking about FAANG (Facebook, Apple, Amazon, Netflix, and Google) as these tech companies soared passed anything resembling logic.  FAANG gradually became MAMAA (Facebook became Meta, Apple, Netflix was swapped out for Microsoft, Amazon, and Google became Alphabet) and continued to dominate the S&P 500, giving them an oversized impact on the markets in general. This carried some additional risk but no one really seemed to mind while prices continued their unsupported ascent.  Of course, the trouble with being outsized is that coming down the hill is a bit harder to stomach since only Apple and Microsoft are holding on to their elevated price.

For decades, hardly anyone paid attention to Treasury Inflation Protected Securities but, with the arrival of inflation a couple of years ago, everyone including your granny was talking about TIPS as a place to park money. TIPS are a great example of something that’s lingered on the sidelines until their moment in the sun (which is dimming as we speak). They’ll fade into the background as the markets correct themselves and wait patiently for their time to come again.

30+ years or so ago, TINA came to stay in our lexicon. TINA is shorthand for “There Is No Alternative” and was a favorite of Maggie Thatcher when she needed to justify her policies of deregulation, spending cuts, and rolling back the welfare programs. Over time, the financial services industry adopted the term and it came to symbolize the concept that, for the long-term, only stock exposure can provide the return needed for plans to be successful.

Because only theorists and statisticians have the stomach for a truly long-term 100% stock picture with its ups and downs, the rest of the investing world occasionally invites TARA, TAPA, and TIARA to the party (There Are Reasonable Alternatives, There Are Plenty of Alternatives, and There Is A Realistic Alternative). In order to make T x4 work, you have to essentially practice market timing and gauge when to get into the “Alternative” and when to get out of them and back into the equities.  If history has taught us anything, it’s taught us that no one is any good at timing the market consistently enough to out-perform a well-balanced low-cost portfolio long term.  There’s a reason that the saying goes “Harry Potter and Warren Buffett combined can’t time the market.” Perhaps we should leave the T-pack to the politicians.

Like miniskirts, leg warmers, and the Kardashians, all of these acronyms and their associated investment philosophies will come and go. Building a well-diversified portfolio and setting realistic expectations then ignoring the noise around you is a strategy that never goes out of style even if it doesn’t have a fancy acronym.