
Entrust your fund manager for wealth creation
Authored by Vineet Sachdeva, Entrepreneur Partner-Quantitative Equity Investing, Alpha Alternatives
Monday May 2024
On the topic of wealth creation, it is imperative of delegating investment responsibilities to a seasoned fund manager emerges as a strategic necessity. Mostly, we think we are right on everything, but in the real world, we might not be even partially correct if not completely wrong. When the truth is uncertain, our brains resolve uncertainty without our knowledge by creating the most likely reality they can imagine based on our prior experiences. We all had massively different experiences, that reflect our views, including investments.
A recent study shows that many investors (including newbies) lose money in futures & options trading due to lack of knowledge, investing based on some financial influencer’s advice, and absence of proper risk management processes. On the other side, they are not aware of the market movement followed by additional purchase to average losses even elevated the problem/losses. Just blindly believing some social media influencers will not create wealth, in fact it can lead to capital loss to a great extent.
Investors’ need for money is bringing them closer to the problem of ‘quick money’. Let’s understand this: – If you tell me that, I have found an easy way to double my money in a week. I am not going to believe you for sure. But if I need money to pay my house rentals and other related expenses, I will at least listen to the conversation. And if I need money for survival needs like food or medical treatment, I will hang on to each word. Your willingness to believe something is influenced by how much you need to come out of a particular situation.
Investors should always remember the basic rule of investing that it’s a time-consuming endeavor. As an investor, you may find it challenging to navigate the ever-changing landscape of investment opportunities, conduct thorough research, and make informed decisions. This is where a skilled and experienced fund manager can play a vital role. Let’s understand this in detail:
- Professional Expertise and Experience: Fund managers, equipped with extensive quantitative expertise, leverage decades of experience in meticulously studying financial markets. Their analytical acumen encompasses a nuanced understanding of investment options, market trends, and the intricacies of potential opportunities and risks.
- Time and Convenience: Managing an investment portfolio demands a profound investment of time and cognitive resources. Delegating this responsibility to a seasoned fund manager liberates investors to redirect their focus towards other critical aspects of their professional and personal lives. The fund manager, equipped with sophisticated tools, navigates market complexities with temporal efficiency.
- Diversification and Risk Management: A cornerstone of prudent investment management lies in strategic diversification. Fund managers, endowed with access to a comprehensive spectrum of investment avenues, craft portfolios tailored to individual risk tolerances, goals, and temporal horizons. Concurrently, they deploy advanced risk management strategies to mitigate potential losses and safeguard capital.
- Access to Exclusive Opportunities: Fund managers, through professional networks and institutional affiliations, gain entry to exclusive investment opportunities such as private placements (e.g., AIFs and PMS). These opportunities, often beyond the reach of individual investors, underscore the unique value proposition that fund managers bring to the wealth creation landscape.
- Emotional Discipline and Long-Term Focus: Amidst market volatility, emotional intelligence becomes a distinguishing trait of seasoned fund managers. A departure from the impulsive decisions often witnessed among individual investors and fund managers operate with a strategic and long-term focus. Rational decision-making, rooted in comprehensive analysis, minimizes emotional biases, and enhances the prospect of achieving enduring financial objectives.
Conclusion: Having a fund manager to manage your investment portfolio offers several compelling advantages. Their professional expertise, experience, and access to exclusive opportunities can help optimize your investment returns. However, it is crucial to conduct due diligence when selecting a fund manager, considering their track record, investment philosophy, fixed fee based or performance-based fee structure, and alignment with your investment objectives.
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