SOURCE: Erickson Capital

October 22, 2008 08:00 ET

A Solution for Today's Volatile Markets: Principal-Protected Investing™ From Erickson Capital

LOS ANGELES, CA--(Marketwire - October 22, 2008) - Erickson Capital, a wealth management and financial planning firm, announced today that it is offering "Principal-Protected Investing™" strategies for investors. "Our current financial crisis leaves no doubt that markets are inherently volatile and, often, downright scary," says Dean Erickson, CFA, president of Erickson Capital. "Principal-Protected Investing addresses volatility by structuring diversified portfolios with investment products that help protect principal against loss while utilizing aspects of asset-allocation strategies."

"During the recent stock market turmoil, many asset class prices went down together due to investor needs to sell anything they could to raise capital and alleviate portfolio risk. This means that asset allocation, an industry-standard strategy that stresses spreading money among various asset classes and is intended to reduce overall risk, works far better in up-markets than during down-markets when you really need its help," says Erickson, who has been tracking market trends since graduating from Brown University with a degree in mathematical economics in 1982. "Principal-Protected Investing aims to cut off the downside tail of returns, so long-term investors can benefit from investing in a variety of asset classes while remaining sanguine about short-term volatility." (Asset allocation does not guarantee better performance and cannot eliminate the risk of investment losses.)

Many different products may be utilized in client portfolios, though there is no set list of potential investments. However, each individual investment should have a solid backstop against principal loss. FDIC-insured products and those that offer state insurance guarantees may offer credit-safe exposure to fixed income, equity, real estate, currency or commodity returns. "Considering the bankruptcy of Lehman Brothers, a big issuer of structured notes, and the credit crisis that has wreaked havoc on many well-known financial companies, the credit risk of an issuer must always be understood and avoided, if possible," Erickson says. "Principal-Protected Investing emphasizes the use of products that offer reliable principal protection, rather than just a company promise."

Utilizing Principal-Protected Investing strategies does not mean an investor has to give up strong portfolio performance, according to Erickson. DALBAR, Inc.'s famous study, Quantitative Analysis of Investor Behavior 2008, shows that the average investor earns significantly less than performance reports suggest. The study hypothesizes that under-performance is due to investors unsuccessfully trying to time the market with their investments as well as by their not staying in investments for the optimal period. "Principal-Protected Investing can address these issues by removing the perceived need to market time as well as the very real psychological stress from experiencing market declines," says Erickson.

Like any investment strategy, Principal-Protected Investing is not free from costs. Because most of the products utilized should be held until maturity, early sale or redemption could reduce potential returns due to extra commission costs, non-competitive bid prices from illiquid markets, or surrender charges. Products that base their returns on underlying market indexes usually do not pass along dividends from those indexes, so portfolio returns will not include the benefit of those dividends. There may also be negative tax implications from investment in certain products. (Check with your tax advisor before investing.) "However, costs for products utilized in these strategies are typically included in their prices," Erickson explains. "These one-time, built-in fees may actually reduce portfolio costs over time when possible market timing commissions, yearly management fees or multiple load fees are considered."

Principal-Protected Investing may even allow investors to increase their normal long-term allocations to higher expected-return asset classes like stocks and commodities. Thus, the potential for increased overall portfolio returns may well make up for costs from any lost dividends, loss of liquidity or tax implications.

"Principal-Protected Investing requires expertise as well as the ability to access many different product sponsors," says Erickson. "At Erickson Capital, we created Principal-Protected Investing to provide diversified portfolios offering exposure to a variety of asset classes including stocks, bonds, commodities, currencies and real estate in an effort to help clients meet their financial goals while reducing their down-side risk." (There are risks involved in investing, including market fluctuations and possible loss of principal, which may not be suitable for every investor.)

For more information on Erickson Capital, visit, call 310-601-8337 or e-mail Dean Erickson, CFA, is a Register Representative of and securities offered through Berthel Fisher & Company Financial Services Inc. Member FINRA/SIPC. Erickson Capital is independent of Berthel Fisher. Opinions and interpretations expressed above are solely those of Dean Erickson, CFA, and do not represent the opinions of Berthel Fisher & Co. Financial Services, Inc.

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