A Fund Manager Tried To Kill Me
No, I’m not joking, the other week I was listening to 2 fund managers who both made me want to take a knife to my wrists.
Not only have they never been taught how to present to an audience and keep people interested, but their presentations were just full of technical jargon and their opinions on the markets and why their fund is the best, backed up by no figures or suspect ones that don’t take into account charges.
So if I’m bored and trying to escape and I understand what they are talking about, what about you, a normal person, wondering how to invest your money to be able to fulfill your dreams? What do you do?
You need to consider 3 things:
1. Risk – what risk do you want / need to take with your money?
2. Return – what return do you want / need to achieve your goals?
3. Cost – keep this as low as possible.
This is what I do for all of my clients.
Don’t get overwhelmed by fund manager talk. Don’t get drawn by the bright lights of their performance, 5%, 10%, 30% (not forgetting the downsides too of -5%, -10% and -30%!)
Consider yourself and your needs.
[highlight dark=”no”]Risk[/highlight]
Consider yourself on a scale of 1 – 10. 1 is very low risk, so your money is in a bank account. 10 is lots of risk so you are investing in stocks and shares all around the world.
The more risk you take, the more potential for growth you have.
The longer you have until you need your money, the more risk you can potentially take as you have time to recover if something bad happens, like a credit crunch!
However, what is the point of taking more risk than you need to? If you had all of your money in cash, and it only grew by a small bit each year, could you still achieve your plans and dreams? If no then you may need to take more risk, but if yes then maybe keep your money in low risk investments.
[highlight dark=”no”]Return[/highlight]
What return do you need from your investments / pensions / savings to achieve your goals? Depending on how much growth you need or want can help you to decide where to invest your money.
There are so many fund managers out there who are saying that they are the best. But they can’t all be the best. If one manager is doing well and his / her fund is doing better than the average, then who is doing worse than the average to balance it out?
So that’s ok then, we just need to find the fund managers who are always performing above the average. Easy, right? Nope! If you look at which funds are the best over various time periods, then it just keeps changing.
Therefore if we cannot buy the best funds as they keep changing, performing well one minute and badly the next, compared to the average, then why not just buy the average? That way you get to cut down on cost too?
[highlight dark=”no”]Cost[/highlight]
The more money that comes out of your investments / pensions, then the less money that there is for you. Therefore if you use funds that track the index and so achieve the average return, as discussed above, they have lower costs, typically 1% or more less expensive. Therefore you could be getting the same return as an ‘active’ fund manager but getting more growth for your money as the costs are lower.
So if you need help to decide on where to invest your money, as everyone’s situation is different and therefore requires a different strategy, then please contact us as we would love to help.
