Economic Commentary
Category: Economic Commentary

Are You a Crock-Pot?

Sullivan's Market $ense: A column to help investors gain perspective on today’s market noise

I like cooking in a Crock-pot. When you slow cook in a Crock-pot the culinary techniques are simple. Chop some ingredients, add some ingredients and add some seasoning; turn on the Crock-pot and enjoy your day. Dinner will be ready when you get back and the house will smell great. There is no roux to make, no turning halfway through, no whipping until it just peaks or mixing until it only has a few lumps. All of the ambiguity is gone. Put stuff in, cook a long time and enjoy. What could be easier? But sometimes I haven’t got all day. So I turn to the microwave. A microwave is like using a backhoe rather than a shovel. It is powerful and gets the job done quickly, but it is easy to ruin your food. Cooking well in a microwave requires constant attention and good knowledge of cooking times. Otherwise your dinner will be dry, boiled over or half cooked and half raw. Microwaving can be a delicate procedure. A Crock-pot style investor is one who spends a good amount of time up front working on their long term goals and planning their investment strategy. When ready, they put their plan to work by building their portfolio and at that point, they leave it alone. They might come back every once in a while and reassure themselves that everything is going well but they don’t feel the need to hover over the portfolio. If called for, they might make a minor adjustment. Microwave style investors are frenetic, constantly checking and changing. They have built a portfolio that they aren’t sure of. They have built a portfolio that they hope will do well over the next several weeks or months, but not decades. Regular, major changes will be required to keep this portfolio headed in the right direction. Most investors don’t have the time, skills or tools to be good microwave investors. This is the realm of Wall Street techies with vast skills, technology and staff. They are hard to beat. However, Crock-pot investing, like cooking, is pretty easy. Plan well, execute once and make small modifications infrequently. Major modifications to a Crock-pot portfolio are driven by changes in goals. Goal changing events, such as a death, birth or sickness may mean it is time to change the recipe; much like unexpected guests might cause you to add more vegetables or water to your pot. Advantages to being a Crock-pot investor are numerous:

  • Lower turnover leading to:
  • Lower trading costs
  • Lower commissions
  • Lower taxes from realized gains
  • Better clarity regarding long term expectations
  • Less confusion
  • Less angst

Here is my suggestion: Be a Crock-pot, not a microwave. Crock-pot brand is a registered product by Sunbeam Products, Inc doing business as Jarden Consumer Solutions. Brian B. Sullivan, CFA President & Chief Investment Officer, Regions Investment Management (c) Regions Bank, Member FDIC. The foregoing represents the opinions of the author, Brian Sullivan, and not necessarily those of Regions Bank or Regions Investment Management, Inc. (RIM). RIM provides commentary to clients of Regions Bank, an affiliated company wholly owned by Regions Financial Corporation. The information contained in this report is based on sources believed to be reliable but is not guaranteed as to accuracy and does not purport to be a complete analysis of the security, company or industry involved. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This report is designed to provide commentary on market strategy and the opinions expressed reflect the judgment of the author as of the date of publication and are subject to change without notice. RIM assumes no responsibility or liability for any loss that may directly or indirectly result from the use of such information by you or any other person. Investment advisory services are offered through RIM, a Registered Investment Adviser. RIM is wholly owned by RFC Financial Services Holding LLC, which in turn, is a wholly owned subsidiary of Regions Financial Corporation. RIM is not a registered municipal investment advisor and neither RIM nor any of its employees provides advice to municipal entities or obligated persons with respect to municipal financial products or the issuance of municipal securities, including regarding the structure, timing, terms and similar matters concerning municipal financial products or municipal securities issuances, or engage in the solicitation of municipal entities or obligated persons for such services. RIM’s services to municipal entities and obligated persons will be limited to providing investment advice in its capacity as a registered investment adviser. With respect to any information, materials or communications provided by RIM or its personnel to any municipal entity or obligated person that does not relate to RIM’s investment advice, (a) RIM is not recommending an action to the municipal entity or obligated person, (b) RIM is not acting as an advisor to the municipal entity or obligated person and does not owe a fiduciary duty pursuant to Section 15B of the Securities Exchange Act of 1934 to such municipal entity or obligated person with respect to such information, materials or communications, (c) RIM is acting for its own interests, and (d) the municipal entity or obligated person should discuss any information, materials or communications with any and all internal and external advisors and experts that the municipal entity or obligated person deems appropriate before acting on such information, materials or communications. A copy of RIM’s Form ADV Part 2A is available by calling 205-264-6735.