Will Self, managing director of Stratford-upon-Avon-based Self Financial Planners, looks at the latest 'fashion' in financial products.

Financial market trends are like those in fashion. By the time you latch on, the world has usually moved on. And if you act on them, you just end up with expensive stuff that doesn't suit you and that no one wants to buy.

A couple of years ago, the big trend on the catwalks of the fixed interest markets was for exotic numbers like collateralised debt obligations, hybrids and other fancy instruments that were sold to investors as "high yield". Well, we know how that one turned out.

Trying to sell someone those funky fixed interest products in 2009 is like trying to clear a fashion warehouse full of leg warmers, stonewashed jeans and parachute pants. For sure, someone, somewhere once liked this stuff. Trouble is no one now, apart from '80s revivalists, can remember why.

The fashion industry survives by exploiting a desire in consumers for certain "looks" based on what the rich and famous are wearing. By the time products based on this look hit the mass market, they are no longer fashionable. This guarantees continued turnover.

Likewise, much of the financial services industry profits by making products that cater to whatever emotion investors are feeling at any one time. When those products no longer fit the zeitgeist, a new set is rolled out.

Two or three years ago, with investors focused more on return than risk, the industry had a ready-made market for complex products whose attractive yield was achieved through often hidden levels of credit risk and leverage.

A long period of low interest rates and relative economic stability had lulled many investors to the dangers out there.

The consequences of that lack of attendance to risk, not just by ordinary investors but by major financial institutions that should have known better, were seen last year in the global financial crisis.

Scarred by that experience, many people have now swung in the other direction and are more focused on risk than return. So the financial services industry has obliged by creating products that appeal to that need.

These include new types of structured products that guarantee your investments against loss for a specified number of years. Additionally, there are products that lock in any capital growth you achieve for specific terms.

The marketing line for these "capital guaranteed" products is that investors can get exposure to higher return assets without the associated risk. After the crisis of 2008, this sounds particularly appealing and is an easy sell.

But just as people three years ago were buying structured products not fully aware of the risks they were taking, are they now buying them not fully aware of the fees they are paying?

Bear in mind, also, that many of these products are guaranteed only at maturity. If you sell at a loss before the agreed maturity date, you lose your capital protection. In the meantime, you have paid all those fees for nothing and inflation has eaten into the purchasing power of your original investment.

And no investment can ever be truly guaranteed. Even the promoters of these schemes admit that they cannot predict what rates of return will be achieved. As well, investors are exposed to the financial soundness of the organisation issuing the guarantee and the risk that the guarantee will be terminated.

Most of all, there is the question as to whether investors really understand what they are investing in. In some cases, the conditions are such that the "guarantee" is not as solid as it appears.

In the past month, three providers of capital guaranteed structured products have been placed into administration.

Even when the investments are understood, there is still the question of cost. Research by the Department for Work and Pensions last year found guaranteed products were "too expensive to be attractive to most people".

In the final analysis, it is completely understandable after the events of 2008 that investors worried about the return of their capital would be searching for products that give them greater peace of mind.

But this need has to balanced against the cost of the products, the lack of liquidity, the multiple conditions, the lack of transparency around the underlying investments and the fact that nothing ever can truly be guaranteed.

An alternative approach is to maintain a diversified pool of assets - cash, fixed interest, listed property and small, large and value stocks in local, developed and emerging markets - commensurate with your own risk appetite.

These investments should be in a low-fee managed fund that controls risk through broad diversification, is mindful of costs and taxes and that seeks to tap the long-term returns of various assets in a transparent, disciplined way.

Those investors who are older, particularly risk averse or anxious to preserve their balances can opt for more defensive portfolios with a greater proportion of assets in cash and high quality, short-term fixed interest.

This is a very strait-laced, some might say boring, approach. But it's effective, easy to understand, low cost and it never goes out of fashion.