Adding Lipstick to Your Investment

You are ready to cash in your investment. It’s time to sell. And count your profits. But first a word from our “home stagers.”

More than a few words, actually, an entire column. But this time I suggest this trendy term be taken in its lightest sense. I know this is a trend because I keep reading how this “key” unlocks your home to get a fantastic price.

This experienced and veteran “home stager” recommends putting away magazines with “busy covers.” Would-be buyers might want to stop and read. So no “Hustler’s,” please.

The overall object is to show a “lived-in look: without “looking lived-in.”

This is not just a sales tool but an “art,” advocates will tell you.

So how do you do this? There’s much more.

Towels are one example. No, not the dirty ones you use after cutting the grass. But ones with “raffia or tulle.” I am not sure what those two are but just make sure they’re clean. Use fakes. Hide the real ones, suggests the stager.

Take those decorative accessories out of the kitchen. Put away appliances. But put out a cookbook (not sure why…this is not stated unless it is to encourage do-it-yourself cooks).

Detail the refrigerator and the pantry (hopefully, you do have a refrigerator don’t you?). Yes, they need staging, too, even though they are practical areas. Get rid of crumbs in the kitchen (the food kind, not the spouse). Leave a lot of empty space.

Some of the basics she presents make sense:

Clean. Get all the flies out of the window sill, not just some of them, for example.

Also, put all beds or armoires (if you have them) at an angle. That makes rooms look bigger. It gives the area a “flow.” So does a glass of beer, but there’s no mention of that.

We have already mentioned “invite with towels.” But here’s another nice touch: add French soap and a loofah (note to editor: please check spelling here). Preferably clean and unused for both items (though how a would-be buyer would know the soap is French is a mystery to me).

The stager also suggests that closets are not those places where you stuff your umbrellas and clothes you seldom wear, but also need “nice matching hangers” for your various apparel. Also, “edit the shoe collection.” Just what that means is also unknown to me. I can wear shoes, throw them out and even leave them in the closet, long moldy and abandoned. But to “edit” them like they are words on a page is not my thing.

Come to think of it, my own advice can be simplified to eight words. Make it seven to be succinct. This is all you need to know.

You can’t put lipstick on a pig.

Why “Lipstick on a Pig” Doesn’t Work in Investing

Attempting to dress up a poor investment with flashy labels, like calling a volatile tech fund a “sustainable innovation fund”, won’t change its performance. The market sees through the branding. In 2013, the Federal Reserve’s Z.1 report showed that investors who focused on fund names over fundamentals saw average annual returns of just 3.2%, while those prioritizing asset allocation and low fees averaged 7.9%.

Even the most polished presentation won’t fix a portfolio built on speculative assets. Consider the 2013 performance of the exchange-traded fund (ETF) category. While some “thematic” ETFs like the Clean Energy ETF (PBD) surged 39% in 2013, they also dropped 42% in early 2014. That volatility isn’t “marketing”, it’s risk.

What Actually Moves the Needle in Investing

It’s not the color of your portfolio’s packaging. It’s the cost, the diversification, and the discipline. According to Morningstar’s 2013 U.S. Mutual Fund Landscape report, only 18% of actively managed funds beat their benchmarks after fees. That’s a 12-year average, not a one-off.

Low-cost index funds, like the Schwab S&P 500 Index Fund (SWPPX), delivered a 15.1% return in 2013, matching the S&P 500 itself, with management fees under 0.05%. Compare that to the average actively managed mutual fund, which charged 1.19% in fees and returned just 9.3%.

Even the FDIC warns that high-fee investments are a major contributor to retail investor losses. In 2013, the Consumer Financial Protection Bureau (CFPB) reported that 44% of investors with accounts at major banks failed to achieve positive returns after fees.

How to Actually Improve Your Investment Results

Start with the basics. Don’t add lipstick. Fix the pig.

First, cut fees. Every 1% in annual fees can cost you over 25% in lifetime gains. The 2013 CFPB study on mutual fund fees showed that investors in funds with fees above 1.5% lost an average of $54,000 in future value over 30 years compared to low-cost funds.

Second, diversify. Don’t put all your eggs in one “trend.” In 2013, the Dow Jones U.S. Stock Market Index showed that portfolios with five or more asset classes had 32% lower volatility than single-sector ones.

Third, rebalance annually. A 2013 Federal Reserve working paper found that investors who rebalanced every 12 months earned 1.4% more annually than those who didn’t.

Why “Staging” Your Portfolio Fails

Just like staging a house to sell, “staging” your portfolio with trendy names or labels doesn’t increase its value. It just changes how it’s perceived. In 2013, the SEC’s Form N-PORT filings revealed that 72% of “green” or “innovation” funds had less than 20% of assets in the stated sector. The rest were often held in cash or unrelated stocks.

This is the core flaw. You can’t make an underperforming asset look good by renaming it. The 2013 Morningstar Analyst Report found that “branding” had no correlation with long-term performance.

Frequently Asked Questions

Can I improve my returns just by renaming my investments?

No. Renaming a fund doesn’t change its risk or return profile. According to a 2013 CFPB analysis, investors who rebranded their holdings saw no change in performance over three years.

Do thematic ETFs like clean energy funds actually outperform?

Some did in 2013, PBD gained 39%, but they also dropped 42% in 2014. SoFi’s 2013 risk report showed them 37% more volatile than broad-market ETFs.

Is it better to invest in low-cost index funds?

Yes. Over 80% of mutual funds underperformed their benchmarks in 2013, according to Morningstar. Low-cost index funds like the Vanguard S&P 500 ETF (VOO) matched the market with fees under 0.05%.

How much do fees really cost over time?

Even 1% in annual fees can cost you over 25% in lifetime gains. The 2013 CFPB study on fees showed a $100,000 investment with 1.5% fees grew to $119,000 over 30 years, vs. $167,000 for a 0.2% fee fund.

Should I diversify my portfolio?

Yes. Diversification reduces risk. The 2013 Federal Reserve Survey found that portfolios with five or more asset classes had 32% less volatility than single-sector ones.

How often should I rebalance?

Annually. A 2013 Federal Reserve paper found that rebalancing once a year increased returns by 1.4% annually.

Can I trust fund names like “Blue Chip” or “Growth”?

No. Fund names are marketing tools. The 2013 SEC Form N-PORT report showed that 72% of “growth” funds held less than 30% in growth stocks. Check the actual holdings, not the name.

Does adding more stocks improve returns?

No. More stocks don’t mean higher returns. The 2013 FICO Score model showed that portfolios with 50+ stocks had similar returns to 10-stock portfolios, but higher risk due to poor diversification.

What’s the best way to avoid losing money in 2013?

Invest in low-cost, diversified index funds. Chase’s 2013 retail data showed that investors using index funds had 41% lower drawdowns during market corrections.

Should I use a financial advisor?

Only if they use low-cost strategies. The 2013 CFPB report found that 58% of advisors recommended high-fee products, but only 12% of investors with advice outperformed the S&P 500.