One of the most crucial decisions potential investors must make is who to entrust with their hard-earned money. There are thousands of asset-management firms claiming to be industry leaders. Investors need to exercise due diligence before retaining any firm's services. Here are some tips to help you choose the right organization.
Past results of company and staff A company confident in its product willingly divulges past financial and other information about its success. The company's top executives should have verifiable track records that demonstrate competence and commitment to their customers. Ask the firm who your direct contact will be, their educational background and overall experience. Ask lots of questions!
Public funds or private funds This question will be answered by the initial amount you choose to invest, and the services offered by your potential asset manager. Public funds are more flexible, and offer diversity even with a relatively small initial investment. Mutual funds, one type of public fund, carry a lower amount of risk because of their asset diversification. Investing in one stock (e.g. Apple) means you are putting all your faith in that one company to perform better than it did when you made your initial investment. Mutual funds invest in stocks, bonds and various commodities simultaneously, thus putting your eggs in multiple baskets. However, some mutual funds invest in several high-risk stocks, so do your homework. Private funds generally require a large initial investment, which eliminates most from considering them as an option. Hedge funds, the most common is a private fund, are started by a large initial investment from the manager, grows as new investors join. Hedge funds allow investors to make withdrawals and deposits unlike public mutual funds. An asset manager should clearly and confidently articulate their strategies and goals pertaining to the fund upon request. A reputable hedge-fund manager should be up on all new regulations, especially with the European Union's December release of its Alternative Investment Fund Manager Directive.
Compatibility Your asset manager will not be considered a friend, but a business partner. The personality of your direct contact should be in line with your own. If you are a conservative investor wanting to build toward retirement, a high-strung financial service broker who makes you feel uncomfortable is probably not for you. Many investors need to be able to questions and communicate with their asset manager whenever necessary.