There are plenty of options in the world of investing today. From equities to leveraged options and complex interest rate swaps, there is a multitude of choices for investors to boost their wealth.
But when it comes to choosing the right combinations of these assets and using them in an intelligent manner, many struggle to do it right.
The average DIY investor has not been able to perform at a high level and the evidence is clear on this point.
Openfolio, which has data of more than 100,000 people tracking the performance of their investment portfolio, showed that the average investor on its platform had a gain of roughly 5 per cent in 2016. This was less than half the 12 per cent total return of the S&P 500 the same year.
In 2018, the average investor underperformed the S&P 500 in both good times and bad, lagging behind the S&P by more than 100 basis points in two different months, according to Dalbar’s Quantitative Analysis of Investor Behaviour Study.
In October that year, which was a bad month for the market, investors lagged by 113 basis points, while two months earlier in August, a strong month, the average investor lagged by 146 basis points.
In both cases, the statistics compare the performances of portfolios comprising pure equities. The chances of strong performance become even slimmer with the inclusion of fixed income and alternative investments, which require different analytical skills.
Against this backdrop, it is not surprising that many people are turning to investment management professionals to manage their money for them.
Leaving it to the Professionals
At Bank of Singapore, we have seen a clear rise in the demand for discretionary portfolio management (DPM) services among high net worth individuals – a 40 per cent jump between 2016 and 2018.
Among them are successful entrepreneurs, who are more focused on building their businesses and may not have the time to pay close attention to their portfolios. They may hire sales managers, deliverymen or logistics staff to take care of certain aspects of their business operations. They may then realise that that they can do the same with their hard-earned money.
As entrepreneurs, they know their business, supply chain and market dynamics inside out. However, they recognise that they do not have the same information advantage when it comes to investing.
DPM, a form of investment management in which buy and sell decisions are made by portfolio managers for the client’s account, makes perfect sense to them. These investment professionals leverage on their vast experience to navigate client portfolios through fast-changing market conditions, without emotions attached.
The trend is also taking place among Asian investors, who are traditionally more hands-on and involved in their investing habits. Many of them are turning to professional fund managers to manage their money and investments.
In short, people are relying on professionals to do the job.
Leave it to a professional portfolio manager to manage your wealth so you can stay focused on growing your business.
To find out more, please click here.
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