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The most interesting review of american idol...


‘American Idol’ and investment returns

Written by Personal Finance / J. Randell Tiongson
Sunday, 24 May 2009 21:13


I’m not a big fan of TV shows but there’s one show I make sure to watch week after week, along with the rest of the world. The recently concluded season of America’s most popular series has got to be my favorite because the finalists were all so good, particularly the final five. My favorite contestant was Danny Gokey because he was really a good singer.

I was so certain that Danny would make the final two. He was an exceptional singer and he seemed to be very popular. In fact, Danny was never in the bottom three...well, up until they were only three. I was looking forward to a final duel between Danny and Adam Lambert, who was the judges’ favorite and probably the most artistic contestant the show has ever seen. Danny’s powerful soulful voice versus Adam’s unbelievable range would be one great show to watch. But what happened? Adam went on to the finals but he was pitted against a dark horse, though extremely talented Kris Allen. Adam Lambert is a charismatic and exceptionally talented favorite contestant; the judges practically crowned Lambert weeks before the show ended. We all know what happened, with Kris Allen bagging the title as the biggest upset of the show’s eight seasons.

What does American Idol got to do with personal finance? Well, Kris’s surprise win can be likened with the way our investments turn out. The proverbial question everyone asks is how their investment would fare in the future. The quest for good returns and the fear of losses will always be in the mind of an investor—but in reality, no one can really predict the final outcome of our investments. Times change and so do perceptions and realities. How many times have we thought that the investment we made was a great one and we were so certain that it would yield the best growth we can ever imagine...yet fell short of our expectations? I remember my father telling me he made some investments in the past because everyone around him thought they would yield a fantastic return in the future. Sometime ago, I saw an envelope among my father’s files that contained numerous stock certificates. I was so excited going through them hoping to find a gold mine like common shares of Philippine Long Distance Telephone Co. or Ayala Corp. but all I found were old certificates of some companies I have never heard of and obviously not existing anymore. Like my father, many have invested in many endeavors because they probably looked really good at the time and, from their perspective, a sure winner.

Obviously, investing and talent shows are not really the same thing, or are they? A few weeks ago, if we asked people who they thought would win American Idol, I bet most would have said Adam Lambert and quite a number would have predicted Danny Gokey. If you were approached 20 years ago about investing in a revolutionary new business called Pagers (remember Easy Call and Pocket Bell?); or investing in ways that would make use of copra say, 50 years ago—how would you have responded? They seemed to be winners at the time.
There are no sure wins in talent shows and in investing. Popularity, even some science can be a good gauge to predict the outcome but can never be a sure thing. So what does one have to do? Well, think hard about the investment, study and research on it but it is not prudent to cast everything in stone, as the saying goes. Expect changes and periodically review your investment strategy as your sure winner may end up being a runner-up or worse, a loser. I also reiterate the practice of risk management, particularly diversification. Remember my father’s investments? Well, not all of them turned sour—quite a few of them became real winners. Good thing my father knew that diversification is very important.

Another parallelism I also like to point out, at the risk of getting the ire of Adam Lambert fans, was about intrinsic value. Adam Lambert, though extremely talented and having everything in his favor, was more hype and probably did not represent good old-fashioned values. Kris Allen was, to many, a good kid with strong moral values. Allen’s having a squeaky clean image, being a church singer and having been a missionary turned the tide in his favor. Of course, both Lambert and Allen are really good singers but like life, there are many other factors that need to be considered. In investing, there are programs that are termed as “ethical investments”—those that are socially responsible, have moral standards and generally projected to be “good” business in the deeper sense. Ethical funds (such as mutual funds and other unit trust funds), in many cases, perform better than their counterparts. A particular ethical fund (in the UK) I researched on yielded a five-year average yield of 28.63 percent as compared with the UK All Company Sector average of only 9.66 percent. Of course, proper investment management is still just as important, regardless if one is investing in ethical investment or not. Further, there has been a steady increase in investments—in ethical investments particularly after the world financial turmoil. It seems that people are not just interested in the money to be made; they are also just as concerned on how the money is made.

I am merely using the image of Kris and Adam for analogy and I can’t assume any truth about their projected characteristics. But Kris’s win over Adam and ethical investments performance over the others make a compelling argument, don’t they?

As always, I look to the book of life for guidance and here’s what I got: Then He said to them, “Watch out! Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions.” (Luke 12:15, NIV).

I’m looking forward to the next season of American Idol.
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J. Randell Tiongson is a Personal Finance coach and educator and the president and COO of Personal Finance Advisers Philippines Corp. He is a director of the Registered Financial Planning Institute Philippines and has been engaged in the various facets of the financial-services industry for over two decades. He is also the cofounder of www.income-tacts.com, an interactive site dedicated to the financial literacy of every Pinoy. For inquiries on training, speaking engagements, financial planning and consultancy, you may send an e-mail to