Effective management of money is just as important as earning it. Following a good investment plan is critical for avoiding cash flow problems in the future. However, with a number of criteria such as investment horizon, liquidity needs, risk profile etc. being taken into consideration, investment can turn out to be a complex process. Add to that the need for constant monitoring and rebalancing and the task becomes extremely perplexing and time consuming. Hence the need for a professional investment manager.
With thousands of investment experts vying for your money, the task of choosing your manager can be just as complex as managing money itself. Using the following criteria to filter out your options can make your job a lot easier.
1) Experience -A firm which has created wealth for its clients in various economic cycles, market situations and investment scenarios is likely to be able to adapt easily and provide the correct solution accordingly.
2) Basket of products -Investment management is a complex process which requires a range of products for the purpose of diversification and hedging. Ensure that your investment firm can act as a one stop shop for all your investment needs, not just in the present, but also in the future, and is able to provide you with every asset class available in the market.
3) Research Capabilities Check how strong the company's research team is and how accurate their calls have been in the past. Extensive research based on fundamentals is essential to be able to identify trends and patterns in the market and thereby give the correct calls for the future.
4) Fund Management Team -The past experience and qualifications of the company's fund manager is a credible yardstick of their competence and the returns they can generate for you. It is also desirable that the fund manager holds such a position that makes it unlikely for him to be dissociated from the company.
5)Past performance -The past performance of the company's in house products and advisory is one of the most common and effective ways of judging their quality and credibility. Understand the calculation methodology followed to ensure that the data presented has not been manipulated.
6) Investment Philosophy -An investment manager needs to have a clear outlook and sound mandate in place, in the absence of which, he could be cluelessly allocating funds to random assets. Understand the philosophy and strategy the manager intends to follow and check if his aggression, agenda and management style is in synch with yours.
7) Transparency -The frequency and mode a company follows in reporting the status of your investments is the key to being transparent. Ensure that the company can give regular feedback on your portfolio via meetings with the relationship manager, hard copy reports and mechanisms like online portfolio tracking.
8) Customization -Each person has a different risk appetite, investment horizon and liquidity needs. It is hence essential that you approach a firm which gives you a tailor made solution rather than a generalized one, to fulfill all your investment needs.
9)Geographic Presence -A company's branch, franchisee and sub broker network should be considered to ensure that they can provide you with continued service in case you are to change your city of residence.
10) Fees charged -Pay attention to the various payment options, the duration, frequency and mode of payment rather than emphasizing only on the amount of fee charged. Be wary of organizations that seek a share of the profits made (if any) but are not ready to share losses.
11) Operational Strength -With the focus being on sales, the need for adequate sales support is often overlooked. This leads to inefficiency in investment management and reporting, regardless of the fund managers capabilities. Question the relationship manager or an existing client, regarding the quality of service provided and efficiency of the process flow being followed.
12) Current AUM -Being a small fish in an ocean may lead to the client being tangential to the company's growth, and hence, deterioration in service and investment solution provided. Identify a firm where your investible corpus is of consequence and can justify the scale of operations the company follows.
13) Legal Compliance -Documents and agreements presented to you should be iron clad leaving no room for ambiguity and speculation. This is to ensure that all charges levied are as per mutual consent and redemptions can be carried out smoothly without leaving a bitter taste in your mouth.
14) Target Clientele Companies often channelise all their energies and efforts in catering to a particular customer segment. Being a part of this segment is in the clients interest as it would ensure the desired service level and attention.
15) Differential Treatment -Often, contrasting recommendations are given to institutional and retail clients. The presence of such a Chinese wall can be detrimental to client interests and hence should be done away with.
While people do question the need and credibility of investment managers, their capability at creating wealth in the long term is unchallenged. Being patient and realistic with your expectations is critical to having a good investment experience. With India being seen as the centre of the financial world, a scrupulous experts advice can go a long way in creating wealth.
As they say, giving you the right treatment is the doctors job…..but going to the right doctor, is yours.
Happy Investing. Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income, or appreciation of the value of the instrument.
Want a low-down on investment? Consult an investment expert to make the most of your money. However, there are a few things to look at before you zero-in on the best one for you