One of the eternal debates of personal finance can be summed up in three words: Stocks or funds? Before online trading came to be seen as a mass phenomenon, the case for funds as the better vehicle for individual investors was hard to refute--they offered a way for the little guy to diversify. Then stock-picking became the glamour sport of the late 1990s, and funds seemed like a refuge for wimps. Lately there's been a minor backlash against day-trading stock jocks, and you can pick up a whiff of it in some ads for the so-called "iShares" offerings of Barclays Global Investors, the focus of this installment of the "Ad Report Card." These are index funds, but what's interesting about the ads is that in the process of showing you how much better these funds are than individual stocks, one of the selling points seems to be that they are ... a lot like stocks. To see the ads via Adcritic.com, you'll need the QuickTime plug-in: There's one about a small-cap fund, one about a tech fund, and one that touts a basic S&P 500 fund.
The ads: One spot is set, apparently, in a financial services firm. A hapless new guy is accosted, mid-bagel, by two more experienced colleagues. These fast-talking guys start spewing the conventional wisdom of the moment: "Large caps have capped," one deadpans, launching into a bunch of jabberwocky about mid-caps and microcaps. "Microcaps?" asks Bagelboy, puzzled. "As small a cap as a cap can get if a small cap can get small," the other fast-talker replies; they laugh falsely, then cut it short. "Now go make us some money." The colleagues stalk off, leaving Bagelboy unsure what to do. "Avoid the guesswork," says the screen, as the Russell 3000 is highlighted. "Now there are over 50 index funds that you can buy and sell," says a voiceover. "Just like stocks."
In a second ad, the action unfolds in an airplane, and is centered on a woman stuck between a couple of blowhards talking tech stocks, swapping names of so many similar-sounding tech companies that even they can't follow the conversation. Still, their chatter is punctuated by the occasional "There's a stock that's gonna take off." So I guess the woman can't help wondering how to get in on it, a yearning answered by the words: "Why not buy them all?" and a spotlight on a Dow Jones U.S. Technology Sector index fund. The same voiceover closes it out.
Finally, there's a spot starring an unshaven Gen X-er in a litter-filled room, day-trading. For some reason, he's explaining the action to a guy in a suit. The day trader is a complete jackass--"Watch, watch: Bam! I just made 13 dollars like it was nothin'!" "Yes! I'm up one-sixteenth, baby!" And so on. Then we get the freeze-frame: "Time for a little sanity," and the spotlight falls on the S&P 500 index. Again, the same voiceover: Here are these index funds that you can buy and sell, just like stocks.
What they're trying to say: These ads blatantly stoke the anti-stock-picker fire, effectively advising you to forget all those dopey technicians trying to time the movement of various sub-segments of the market, forget the obsessives who pretend to be up on the latest hot tech stock, and forget the hair-trigger traders who devote their lives to scrutinizing the markets. Sit back, be smart, and buy some index funds.
What they're actually saying: Hey, you know those dopey technicians, those obsessive blowhards, those hair-trigger traders? Let's say you're listening to two guys on an airplane, and frankly it sounds like neither knows what he's talking about. Do you as a result want to invest in every single stock they've mentioned? Well, this seems to be what the ad is advising. What if you could forget worrying about which one trendy pick to hop onto--and instead hop onto all trendy picks? On top of that, what if you could do it by way of a vehicle that you could trade in and out of at a moments notice, just like a stock! You could be just like these idiots, only more so!
The Grade: Let's just give it a C-. There's a perfectly good case to be made for index funds, of course, it's just that these ads don't exactly make it. They do a good job poking fun at some of the sillier aspects of the chic for stock-picking, but follow it with a perplexing insistence on touting these instruments as somehow "just like stocks." Maybe this is testimony to how powerful the trader mythos remains. There's nothing wrong with being an active stock-picker, there's nothing wrong with being a more passive fund investor, and there's nothing wrong with dabbling in both. (Actually, there's a fourth Barclays ad that delivers its message very clearly: It shows a woman noticing the rise of South Korean companies, and suggests that a sector fund is a good bet if you don't know enough to bet on a specific firm.) What these ads try to do is sell you on the best of both worlds, but they end up delivering a much more muddled message.