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Lessons Learned from Years with Investments

Important Topics when it Comes to Investment Managing

Recently, unethical business practice has driven many investors to think twice of jump to conclusions when considering a new investment adviser. Potential clients have a few things that are generally misunderstood, and this article will go in depth about those issues and how to clear them up.

One of those issues is fees. A common misunderstanding is that the client will get a better deal if the manager charges a very low rate of management fees. Many people think this because typically the best managers out there – the ones who have displayed that they can generate a great rate of return – will usually charge more. When looking at the whole picture, you will probably benefit more from having a great manager, even thought you will need to expect the higher fee.

Misconception number two, that portfolio turnover is a negative thing. Years ago, when there was a secular Bull Market from 1982 to 1999, this was a typical issue that most managers had to deal with. It’s hard to find investors who take Warren Buffet’s way of buying and holding for a long time, they are far and few in between. Let’s face it, most of us are not extraordinarily rich where losing or gaining a million dollars here or there doesn’t make that much of a difference. In most cases, a superior adviser will have a higher portfolio turn over than most others, but you should want them to provide proof that the turnovers were from a valid business perspective.


The Essential Laws of Management Explained

Trade transparency is a common misconception as well. The Madoff scandal is what drew attention to the issue of trade transparency. There were two factors at play that allowed this scandal to go on for years without anyone raising an eyebrow. The first factor is that Madoff was the adviser for the account and he was the custodian for the account who was responsible for the assets – this is a dangerous business scheme. The second thing is that in statements made to clients, Madoff was vague and lied about how money was made. A trustworthy and ethical adviser will be clear and honest in statements given to clients. For example, a client will clearly be able to see the dates that shares were purchased and the amount at which they were purchased at. ?


Valuable Lessons I’ve Learned About Portfolios

Client referrals is the last issue we will discuss, a hot button issue. Many investors do not know, or are choosing to ignore that fact that asking your advisor for a referral is against SEC rules. The client’s privacy is being compromised when investors are asking for referrals. When trying to explain this situation, you can ask how would the investor like it if their investment details were available to a perfect stranger?

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January 22, 2013 This post was written by Categories: BankingInvestmentsManagement Tagged with: BankingInvestmentsPortfolios
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