Today, there are a plethora of investment options, each of which have expert investment managers. In order to find an investment manager that suits your needs, here are some tips to guide you.
Understand the investment manager’s philosophy
An investment manager’s subjective insight into investments constitutes their philosophy. This often is the foundation of the reasoning he/she will use when investing your money and it’s therefore important that you fully understand and agree with his/her investment strategy.
It’s also important that your investment manager has individuals in his/her team who are like-minded and able to apply the manager’s investment philosophy.
A good benchmark question to ask: ‘Is he/she an active or passive investor?’ A passive investment manager doesn’t make active decisions about what to incorporate into their clients’ portfolios. Instead, they prefer to purchase a small number of shares in the appropriate stock market index – this represents the overall market. Passive investors view the current price of each share as the best indicator of its long-term value.
Conversely, an active investment manager chooses the investments that they want in their portfolio; these choices are based on an assessment of the opportunities that are available.
Past performance is not an indicator of future performance
A long enough timeline is necessary for an accurate evaluation to confirm that your investment manager has delivered results successfully over time.
However, past performance is exactly that – in the past; future performance can’t be based on past performance because the same results may not necessarily be replicated. Furthermore, it’s important to have a comprehensive understanding of the risks that the manager was willing to take in order to achieve the returns.
An investment manager that makes risky choices, may be difficult to work with because your returns are more susceptible to fluctuation.
It’s important to note that active investment managers can perform better or worse than the market depending on which investments they choose to buy.
Set realistic expectations
The primary requirement is that you need to be happy that your investment managers have given you sufficient knowledge of your portfolio. Investment managers are the overseers of the money you entrust them with and will make decisions based on your portfolio’s mandate.
You also need to have a concrete sense of your investment objectives. This will help pave the way for a potential mutually-beneficial relationship that positively contributes to your financial wellness.
Don’t underestimate the power of excellent service
When looking for an investment manager who will best suit your needs, it’s important to take into account their quality of service.
Sloppy, ineffective service will more than likely cause you to change your investment and incur losses that may be detrimental to your financial wellbeing. It’s a good idea to do some research on the investment manager’s character before you make a commitment.
In addition, keeping a level head and not letting your emotions cloud your judgement, can go a long way towards helping you remain focused on your financial objectives. Be confident about your choices even during times of fluctuation so that you can relish the returns.
