Tuesday, December 9, 2008

Fund Managers Are Lousy !

I attended one pursuing session urging us to take their classes on technical stock assesment.  Half way through the following conversation took place :

speaker : You know who uses our services ? ( Technical Chart )
( pause a bit, no one answer, then speaker continue )
speaker : Profesionals ! ... You know who are the pros ?
( then he continued )
speaker : Fund Managers !
student : but .... its hard to say isn't it ?
student : all those mutual funds drop like hell so they are not any better than us.  How to say they are pros ?

The speaker didn't answer well and almost no one signed up with their offers.

Basically its a matter of size.


I used to sell lemonade when I was a boy.  I made about 100-200% profit a day.  Then when I grow up I built a factory to sell lemonade, I would be happy if I can earn 10-15% a year.

Selling lemonade from my garage required $100 capital while a facotry took up $1 million.  

Things get complicated
when size grows !

It is very hard for a $100,000 guy to understand how to handle $2 billions.

BIG guys like mutual fund managers do have some 'limitations' because they are BIG !
1) They cann't simply buy or sell too much funds by law, coz they may 'manipulate' the market at ease
2) They promised investors to keep '80%' of the fund in the market to qualify as 'quity' fund etc.

2 comments:

Kris said...

I agree that BIG is complicating matter..Look at Warren Buffet. He needs to find big cap companies to invest so as not to move the markets. Thus. the choice that he has is very very limited.

Michael Tsen said...

good example, or his EVERY single moves are watched under public eyes :)

thats the price to pay being rich and famous, I am sure they don't mind thao.