An investment fund is a good option for people that want a more hands-off investment. Having somebody else manage your investments for you and make the decisions is ideal if you are fairly new to investing and you worry about getting it wrong. But there are a lot of people out there that advise against fund managers because they underperform.
However, an investment fund can still be the right choice, as long as you pick the right fund, and that’s often easier said than done. If you are considering putting your money into an investment fund, here’s how to go about choosing an investment fund manager.
Ignore the Big Funds
Most people assume that the big funds that handle lots of accounts and trade huge amounts of money are going to be the best. They’ll have the most experienced fund managers and they’ll be able to get you the best returns on your investment.
But the reality is actually very different. It’s important to remember that a funds main priority is making money for themselves, and not for you. They do this by gathering assets from investors and charging fees, and the big funds will always have this mindset.
They’re less concerned with making big returns for the investor and most of the big funds do not perform all that well. You’re far better off going with a smaller fund that only manages a few accounts. They dedicate more time to their investors and they tend to have a better attitude. That isn’t always true, but you’re more likely to find a good fund manager at a small firm.
Check the Fees
The fees are very important and you always need to check them when making your decision. You will have to pay fund manager fees and they can vary quite significantly.
If you go with a fund that charges very high fees, you won’t see that much in the way of profit once the fees have been deducted. Often, you’ll find that it’s the bigger funds that charge the highest fees and the smaller ones will be more reasonable.
Consider the Size of the Portfolio
Looking at the size of a fund managers portfolio gives you a good idea of how they will invest your money. Ideally, you want to find somebody with a smaller portfolio.
This shows that they take more care with choosing stocks and make bold decisions, which is the best way to perform well. If they have a very large portfolio, that does give you some protection because they are diversifying, but it also means that they’re less likely to make any big returns.
Look at Past Performance
Obviously, you need to look at how a manager has performed in the past. But keep in mind that bad performance over a few years doesn’t mean that you shouldn’t go with them. What you are looking for is an idea of their investment style because you want to find somebody that matches your goals. Looking at their past performance will give you an idea of whether they are interested in the short term or long term investments.
If you consider all of these things before making your decision, you should be able to find the right fund manager for you.