Managed Accounts and Funds: Pros and Cons
Hiring someone else to do your investment for you sure sounds appealing. But what are the disadvantages of managed funds?
We asked you to send us your questions about forex trading so today I’m here to give an A to your Q. The question we picked this week is from the Twitter account @ClayLoveDay says I taught him everything he knows about Mr. Japanese Yen.
@ClayLoveDay asks: “Please describe your opinion on using artificial intelligence and managed accounts.”
We are going to do a Jimmy Fallon style Pros and Cons on this one, but first let me tell you this: This is the finance world. Everyone is out there to make money for themselves. And only you can take care of your hard-earned money the way it needs to be taken care of. It’s kind of like hiring a nanny for your child. While there are many qualified caregivers out there that can replace a parent temporarily, it takes a qualified parent to identify a good nanny, and the job of the parent can never be fully replaced. Especially by a robot We will cover algorithm trading in our next video but for now, let’s get into Pros and Cons of hiring an account manager to invest your money on the forex dance floor.
|The money manager may have more experience||He/She may not pay full attentionto your account|
|You don’t have to learn how to trade.||You can easily be fooled by yourmoney manager's track record|
|You don’t spend any time trading!||You will never gain the confidenceto trust your own judgment|
|You can focus on your main career||You deprive yourself of the experiencethat is required to make robust financial decisions|
|You don’t have to deal with the emotions involved with trading||Your money manager could run awaywith your money to Isle of Man|
Related Video: How to Overcome Fear of Investing
PRO: The money manager may have more experience due to long term involvement with the markets.
CON: He/She may not pay full attention to your account and may miss out on opportunities or even ignore minor losses. Con: Unless you are a very high-paying client, the money manager may not pay full attention to your account and may miss out on opportunities or even ignore minor losses.
PRO: You don’t have to learn how to trade.
CON: You don’t know how the markets work and therefore you can easily be fooled by your money managers track record. Just remember, past performance is not a guide to future results: A past record of positive returns does not guarantee similar performance in the future.
PRO: You don’t spend any time trading!
CON: You never evaluate the market independently and therefore you will never gain the confidence to trust your own judgment. Ultimately, you cede all the power to the manager which could lead to unpredictable and potentially dangerous results.
PRO: You can focus on your main career instead of learning to invest your money on the side.
CON: You lose the opportunity to learn the markets. In essence you end up depending entirely on the money manager and therefore you deprive yourself of the experience that is required to make robust financial decisions.
PRO: You don’t have to deal with the emotions involved with trading
CON: You hand over your money to someone who has no emotional attachment to your money. And in the case of a bad selection of a money manager, he or she could even run away with your money to Isle of Man where my hard- earned money now resides.
One major reason why many professionals prefer to invest their own money is the horror stories you might have heard from people around you, who gave their money to “professional traders” or the so-called “money managers” who got their money and lost it. I was actually a victim of this years ago before I got into trading myself. As an over-achieving college student on scholarship with various sources of income on the side, I was approached by a company from Friends Provident called Cambridge Capital (and yes I’m naming names) who got me into giving them around $100,000 over time so that they will trade it for me in mutual funds, and guess what, I never saw that money again (and I most likely ever will.)
But instead of focusing on the downside of trading, I decided to take control of my hard-earned money, and learn to trade by myself. After all, no one cares about your money more than you, right?
I could obviously go on, but the simple fact is we all work hard to make money. Why would you then take the easy path when it comes to investing this hard earned cash? There is no one out there that will care more about your money and your future than you, so it makes sense that with a little effort you will be the best option when it comes to investing your own money. The secret of course is to get educated, and that doesn’t mean lots of time and energy … that means learning a few simple things.
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