Good managers aren’t always smart investors

“The problem with managers who handle their own investing is that they often think they know what they are doing simply because they are senior managers and, as consequence, believe they should be good at it. They are frequently not,” said one investment advisor who spoke to NZ Management and whose summary reflected the experiences of others.

Managers are often too “proud” to pass control of their investment decisions over to others. They also want to be “hands on” when few of them have the time or expertise to make good decisions.

“Delegation” may be well-worn word in the general management lexicon but, when it comes to personal investment advice and portfolio management, too many managers appear unable to heed their own best advice. “They should free-up their time for managing things they are good at,” came the oft-repeated suggestion.

Carmel Fisher, head of investment company Fisher Funds, says the world’s financial and economic turmoil has not impacted the advice she gives her investor clients. It has, however, “changed the way investors think about their investments”, she says. “There is more thought going into investment decisions, less of an appetite for risk and general reluctance to do anything unless absolutely necessary,” predicting that it “might be few years before investors are really willing to consider higher risk assets to capture higher returns.”

Fisher’s recommendations are not, she says, wildly different from what they were five years ago. Investors’ need both growth and income assets, the proportion of which depends on their risk appetite, timeframe, income needs and other existing assets. “The world may have been turned upside down, but the fundamentals of building wealth have not.”

• From the first in major new NZ Management series on finance and the economy. The full article can be found in the April issue.

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