Your Investments
Your Investments – Managing your investments is not an easy task. You need to develop an overall investment strategy, evaluate numerous investments, and monitor those investments on an ongoing basis.Thus, you may want to allow a professional portfolio manager to manage your investments. Some reasons to consider an investment manager include:
To save time – Portfolio managers take active control of your investments, relieving you of much of the work.
To have access to outstanding managers – Some investors feel more comfortable when investment decisions are made by a full-time professional.
To maintain some control over your investments – Although you will not be consulted on day-to-day decisions for your investments, you set the broad parameters used by the portfolio manager, including specifications for asset allocation percentages.
To monitor the performance of your investments – Managers will provide you with statements of their performance, detailing investment returns.
To time transactions with tax consequences – For example, you can instruct your manager to delay sales of securities until the following year if you want to defer capital gains.
There are thousands of portfolio managers available, so you’ll probably need help selecting one suitable for your portfolio. Financial advisers often monitor hundreds of different managers, maintaining information on investment styles, performance figures, personnel changes, methods for selecting investments, and many other factors.
Before focusing on specific managers, you will need to determine your investment objectives. You will focus on your financial goals, time horizon for investing, return expectations, income requirements, risk tolerance, and any personal restrictions you wish to impose.
From this analysis, the list of managers can be narrowed to those most likely to accomplish your objectives. Some factors to consider when reviewing these managers include:
Approach performance figures with caution. While you want a manager with consistent, superior results, return should not be your sole consideration. Be aware that performance figures can be reported in a myriad of different ways. Sometimes simply altering the reporting period by a month or two can produce dramatically different results. If possible, obtain performance figures for the same time period for all managers you are evaluating. Make sure the figures are for a portfolio that is similar to one you would invest in.
Call client references. Current clients can provide valuable information, such as whether reported performance figures are realistic, how accessible the manager is, and whether performance reports are timely and easy to understand.
Research the manager’s background. Ask to review the ADV form filed with the Securities and Exchange Commission. This statement will provide information about the manager’s education, investing experience, investment style, and fee schedule. Review how much experience the firm has in portfolio management and research. Make sure the firm’s investing style is compatible with yours.
Make sure you are comfortable with the manager. Although you will set the parameters for investment decisions and will receive periodic statements, you will not be consulted on day-to-day investment decisions. You must trust the manager who will be managing your investments.
If you’d like to discuss whether you should consider using a professional manager to manage your investments, contact your financial adviser.
Your Investments
