Fund manager Vs Self-management
When it comes to handling money one always leans towards self-management. Well it seems justifiable since who would know what is best for you other than yourself right? Wrong!
You might certainly want the best for yourself and would be extra cautions in your strategies, but that wouldn’t necessarily mean you are getting the best outcome. Wealth management and investments is an entirely different game altogether that requires expertise and experience.
That is why it’s prudent to reach out to a fund manager and it is essentially a smarter way of managing fixed income investments.
Who is a fund manager?
A fund manager is responsible for implementing a fund’s investing strategy and managing its portfolio trading activities. A fund can be managed by one person, by two people as co-managers, or by a team of three or more people. Fund managers are paid a fee for their work, which is a percentage of the fund’s average assets under management. Two or more heads are always better than one!
Why a fund manager?
The obvious plus point is that fund managers are assisted by a team of analysts, who select and monitor a portfolio of assets on investors’ behalf, as it does require expertise if one want to reap benefits. If the fund manager thinks a particular market or sector is about to fall, they can reduce their holdings or sell them completely.
It must be stressed that they pay close attention to cost and risks to capitalize on certain opportunities and ensure proper liquidity of the fund is a crucial aspect of the fund manager’s position.
They also have greater bargaining power due to the size of the total funds they manage thereby sharing his benefit with all investors who would not have similar bargaining power working alone. They also provide regular reports showing the performance of your portfolio that may include multiple investments with an overall perspective.
How to sellect one?
This is not as easy as it sound but not impossible. The only real test of any manager’s ability is to witness how well they perform. Past performance could help, but research studies have shown it is not the only element one should look at.
· Find out who is in charge: The first step is to understand who makes the decisions on the fund. If it is a single person or a ‘star manager’. It’s important to consider what will happen to the fund if he or she moves on, retires or is unable to continue working. Also there internal processes and systems that include a capable investment committee.
· How much freedom the manager or team have: Larger fund houses tend to be more structured. If you’re looking for greater certainty about how the fund will be run, you might decide to stick to the wide range of funds from larger fund houses with a good record of consistency
· Why this manager might beat the market: Once you know who’s calling the shots, you need to make sure that you understand their investment philosophy. The manager might follow a top-down approach, focusing on the outlook for the economy and what it means for certain types of companies and sectors. Alternatively, they might follow a “bottom-up” approach, meaning that they focus on identifying attractively priced companies and don’t pay much attention to the wider economy.
In conclusion a fund manager route in managing your portfolio might be a smart way of growing your wealth and enjoy the simplicities of life.