You may have noticed the vast amount of new products being churned out by Wall Street lately.  Now I’m all in favor of more options, yet the amount of new “products” being introduced to investors on a daily basis is staggering. Besides regular old fashioned mutual funds, stocks and bonds, we now have a slew of ETF’s, ETN’s,  ishares, global ETF’s, brand new sector funds, and the list goes on. The marketing departments of these large investment houses are well aware that investors like the shiny new objects in the window and as such are catering to our need for buying something new and exciting. Index funds, diversifying your portfolio is so 2008 they’ll tell you, come over here and play the new game…

I like ETF’s and for many investors, they compliment your investment portfolio very nicely.  But just because the marketing departments have sliced and diced markets into a zillion new ways to invest, doesn’t mean that it’s the right option for you.

It reminds me a bit of how consumer product companies sell hair shampoo or toothpaste. I was in Whole Foods the other day looking to purchase a new brand of hair shampoo. Lo and behold, there I was confronted by a zillion choices. Do I really need 20 options when it comes to hair shampoo?  Is one brand that much different than another brand? Do I need a shampoo that has lavender infusion in it or is peppermint just as good?

I don’t know about you, but it makes me crazy having this many choices for basically a product that is probably 80-90% the same no matter what label is on it. What’s my objective with this purchase; clean hair. Yet looking around the shelves, you sense that you now need a pre-rinse first, then a shampoo, then an after rinse, then a conditioner, etc. When all along, all I wanted is a high quality shampoo, period. This makes you crazy!

And then yesterday I received a listing of all the new ETF fund options and new sector fund options available for purchase and it made me laugh.  The guide had pages upon pages upon pages of choices, with so many simply duplicating the other, but just called something slightly different. As a way to entice new money into the market, the marketing and sales departments of large investment houses have figured that they can divide the stock market into lots and lots of micro sectors and market them to the public as a “new and improved” way to invest.

Again, ETF’s and some of the new sector funds are pretty cool, but do I need hundred different products that in many cases are basically the same but with different names? The answer is no.

So before you invest in what seems like a brand new fund and brand new way to make money in the market, please, look beyond the label and think about the shampoo example I presented earlier.  What’s your objective, what are your short and long term goals and how can you best implement your strategy. Don’t get fooled by the shiny object that feels new and sexy. Go beyond your emotions and make sure you’re making a purchase based on your long term strategy and not getting sucker punched by a well delivered marketing presentation.