Things to Ask Your Portfolio Manager and Consider Before Investing

Things to Ask Your Portfolio Manager and Consider Before Investing

As an investor, you should consider hiring a portfolio manager. These people are involved in the investment of mutual, exchange-traded or closed-end fund assets. They handle the day-to-day trading and implement the investment strategy. Your portfolio manager should be chosen carefully as they will be responsible for your profits or losses.

Here are some questions to ask your portfolio manager before hiring them:

1. Do You Think the Markets Can be Timed?

Many portfolio managers operate on the assumption that assets are undervalued or overvalued. The strategy is to invest in undervalued assets and reap extraordinary profits once their true value is appreciated. Asking this question will allow you to understand the investment strategy of your manager. In the same vein, you will be able to understand how fast you will reach your investment goals.

Also, this question will allow you to understand the manager’s investment strategy. Some investors primarily use quantitative methods to decide what moves to make regarding investments. Others believe in using their experience and intuition. It is advisable to avoid managers who strongly believe in either of these since neither is perfect.

2. How Much Money Have You Invested in Your Own Fund?

This question will help you identify the managers who are most capable of beating the market. It is even more helpful if you know what proportion of their assets are invested in the funds. If the manager and his family members have invested in the fund for a long period, then you have probably found a suitable portfolio manager. This simply shows that the managers have faith in themselves and you are more likely to make profits if you put your money in such a manager.

Generally, you should look for a portfolio manager with low expense ratios and high manager ownership.

3. What Will You Do in the Next Bear Market?

Most managers can turn a profit in a bull market. The challenge is during bear market cycles. If you are working with an old company such as AFH Wealth Managament, you can find out their overall performance in complete market cycles. In case the performance was subpar in a bear market, you might want to find out the reasons for that performance. If the reasons are unsatisfactory, then you would be better off with a different portfolio manager.

As an investor, it is important to note that all bull markets have a start and an end. It is, therefore, important to make sure your manager can respect and properly manage financial risks.

4. Are You a Fiduciary?

Fiduciaries are meant to protect investors from fraud, and this means your investment will be safe. Even if your manager is a fiduciary, you should find out if they have other safeguards in place to protect you from unethical activities. Also, you should ask them whether they have even received disciplinary action for unlawful actions. It is best to work with managers who stick to a strict code of ethics.

Portfolio managers are important to all investors. With these four questions, you will be able to find a suitable manager for your funds.


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