Managing a sizable investment portfolio can be a full-time job. Add that to all the other aspects of your life that must be managed your job, home and family obligations and there may be little time or energy left.
Many investors in this situation are turning over their investment portfolios to full-time private money managers who can make investment decisions for them on a daily basis. But how do you know if hiring a private money manager is right for you?
Here are some questions you may want to ask yourself before taking the plunge into private money management:
Do I have enough time to take advantage of potential new investment opportunities that may surface on any given day?
Am I comfortable making buy-and-sell decisions on my own?
Am I disciplined enough to stick with an investment mix within my tolerance for risk?
A professional money manager provides full-time management of individual portfolios. Once hired, a money manager can make the buy-and-sell decisions for your portfolio, based on your financial objectives. Professional money management is typically available for a minimum investment of $100,000.
Now you might be wondering how a money manager's services are different from those provided by a financial consultant or certified financial planner.
Unlike a certified financial planner, who only makes recommendations about investment moves, a money manager can actively arrange your portfolio to include investments that would work best for you. And unlike a financial consultant, who typically must consult you before making a trade, a money manager can be solely responsible for trade decisions based on guidelines you establish.
Money managers are also compensated differently. Unlike a financial consultant, who usually receives a commission based on trades, a money manager is generally paid a fee, often based on the value of assets he or she manages.
Other possible advantages of a money manager include:
Convenience. Hiring a money manager to handle the day-to-day concerns of your portfolio can give you more time to pursue other interests. It may also give you comfort to know a professional well-versed in the financial markets is watching your investments.
Ongoing communication. A money manager can report to you regularly about your account's performance. To have someone simply update you on your portfolio's results as opposed to doing all the work yourself is yet another time-saving factor.
Tax-planning benefits. If you need to realize capital gains or losses and they exist in your account, you simply direct your money manager to take these actions.
There is no magic formula for determining whether you should use a money manager, although investors can gain the advantage of a money manager's expertise and full-time research. However, it is important that you think about how comfortable you would be with this type of arrangement, and find a money manager who understands and follows the same investment philosophy as you do.
Zeller is a financial Consultant with A.G. Edwards & Sons, Inc., member SIPC, 379 Lytton Ave., Palo Alto 94301.