Monday, July 7, 2014
Looking for a Great Money Manger for Your Investments? Find One Who Can Do This
Looking for a Great Money Manger for Your Investments? Find One Who Can Do This Wall Street Has Its Secrets. Some Are Supposed to Be Revealed in Government Mandated Prospecti and Notices from the SEC. Investors Don't Seem to Understand All the Jargon and Tables Lex Loeb Contributor Network . The more money a manager or management company has on deposit for mangement the more they earn. A simple 1% fee per assets invested in their management services company nets $10,000 per million. When managers have a few billion dollars say 4 under management it becomes fairly easy money, regardless of whether they grow the assets under managment for 4 billion dollars they get 1% as an annual fee. This nets 40 million dollars in just a year. It is a good business. In order to keep money being invested in the management firm the manager then has to do a reasonable good job at inspiring people to invest their money under the firm's managment as opposed to moving it elsewhere or to a different firm. After ten years assuming no growth in assets a 4 billion dollar fund manager getting on3 percent is guaranteed to get 400 million dollars. The industry has grown very large. A better money manager who grows an original 4 billion dollars to 40 billion dollars under management has something better than a gold mine. 40 billion dollars can compound 1% to his personal accounts at 400 million dollars a year. Some managers and investment companies charge fees to hold trillions of dollars or other people's money. Investors want to make money or just not loose it so paying the 1 percent , often more per year. Investors are not bothered paying even high fees if they think they are making money in spite of them. least the fund manager seems to be making money. Whether or not the fund manager is making money depends on capital gains apperication and dividend payments to investors verses the rate of inflation and taxes paid. In order to rake in quality incomes for a number of years managers want to have minimum limits on investments. High minimums give managers less work to do mailing out annual materials and dealing with paper work. Stock and Bond markets don't exist to make investors rich and managers are not there to prevent securities from loosing money. Investors often pay for managment services at the same time they are loosing money. Hedge fund can have zero annual fees but charge investors a higher percentage of all gains as an incentive to deposit one's money there. Some take 20 and 25 percent of any gains in the portfolio instead of a 1-2 percent annual fee and in this manner they are also investors in the same funds but they enjoy a 100% annual retention of profits verses 75% for their clients. Warren Buffet started one of his original investment companies with a 25% fee on investment gains and look at how it ulitimately paid off for him. A genius investment manager is should be able to take a dollar from a client and in a number of years turn it into a multiple of that. Assuming a money manager can actually achieve a 20% annual yield on investments a dollar invested for 50 years would actually grow to be $9100.44 excluding any taxes from payouts and fee costs to the manager over those years. In 10 years a great manager should be able to turn $1 into $6.19. Very few money managers can do that over time and have any record close to that. The shorter the time period the more likely some managers are going to be able to show a 20% compounded rate of return or higher but when it comes to longer terms exceeding five years and fad trends in the markets, very few money managers even achieve 10-12 percent annual compounded returns. Most celebrated money management firms and mutual funds are not worth very much for the long term. .