Chapter 7 – Self-Managed vs. Managed Portfolio Solutions

Confident and experienced investors may be content to do their own research and to choose their own placements and allocations. Others prefer someone to do it for them or require help in choosing investments and guiding for them. Some investors claim to enjoy looking after their investments and are happy to spend time going into a lot of detail to get it right. However, not everyone gets quite so excited by the idea of poring over fund factsheets, investment descriptions, team due diligence (which sometimes tell you everything you need to know about the strategy), performance figures etc. Equally, many people cannot spare the time to construct their own portfolios and monitor them over the long term, and often make decisions too quickly, increasing the likelihood of missing the big investment picture.

Many firms offer investors a decent one-stop shop opportunity for simplicity, but by mixing a variety of managers across various investment markets can result in far greater diversification such as through a managed solution. All in all, investors should build a portfolio with a risk profile that suits them, and the manager(s) will take care of the rest.

The basic idea behind allocating your money to a fund or managed account is to make the selection process simpler – “all you have to do” is to choose the products that most closely match your attitude to risk. However, it is worth bearing in mind that the performance of funds and managed accounts can be markedly different from what investors expect. There are no guarantees, only targets and goals.

The focus on risk by the financial conduct authorities around the world has prompted the emergence of funds specifically designed to address this issue via “risk-targeted funds”. This is entirely different from risk ratings. Some programs are dedicated to offset risk against portfolios and can, or should be, a part of a portfolio no matter if the account is self-managed or part of a managed portfolio.