I’m a full time equities analyst. I spend hours every day looking for investment ideas, yet I’m about to hand my own cash over to another fund manager to invest.
It may sound a little silly; do electricians or plumbers pay someone else to install lights and unblock drains? Do mechanics pay someone else to service their cars? If you analyse stocks for a living, surely you should be confident enough in your own abilities to invest your own savings, right?
Except that investing isn’t plumbing. In investing, the process is vital. Arguably, it’s more important than the outcome. That’s because investors are part fortune tellers and part researchers. We have to guess at what the future will look like and we’ll often be wrong. With a good process, however, investors stand a chance of being right more often than they are wrong. And one good process, unlike a pipe cutter, can look different from another.
It’s risky and, perhaps, rather conceited to believe one’s own method is the only or even the best one. I’m comfortable applying my method to a part of my portfolio, but not to all of it. So I look for a fund manager who not only has an excellent process, but whose process is completely different to mine.
The manager I’ve chosen is smart, honest and has a knack of uncovering ‘special situations’ – the kind of small, complicated scenarios that most investors would throw in the too-hard basket. I don’t have the skill or the time to find prospects like that. For a part of my portfolio, at least, using a fund manager seems reasonable. Over time, paying the fee may even start to hurt a little less.