Invest.

Why You Need A PPM

Let’s call a Kate Spade a Kate Spade. Most of us only have time for work, a glass of wine with our girlfriends, chocolate, shopping and the occasional Netflix binge. Anything else just does not make it into our schedule (or we at least wish it didn’t make it into our schedule).

This lack of time (and let’s be real…for most of us…lack of interest) is why you need to have a Professional Portfolio Manager (PPM) and team. Typically the bigger the fund companies are, the better they can research the crap out of companies to find the price discrepancies, anomalies, or flat out to take advantage of stocks that are mispriced to bring you value as an investor.

I do believe there is a place for passive investing, or in other words index funds or Exchange Traded Funds (ETF’s) which follow an index for a reduced management fee, which we will talk about another week (I know – you just can’t wait!). However, there is always going to be a place for active management, meaning real people on the ground doing the work and face to face research of the companies they are investing in, versus just following what the market crowd is doing.

I think this chart demonstrates the simple value that professional portfolio managers offer.

The Stock Universe
See the mountain of stocks in the world? Did you even know there are over 48,000 stocks one would have to sort through? However most people (no, not really most people, but the people in the industry or part-time investors), media, funds, etc, focus on the top 275 – 500 companies in the stock world and to be sure every bank and almost everyone in the money world has researched the bejeebers out of the top 500 companies. Trust me, the market is very efficient, and to make up alpha (meaning to make returns over and above the market) on those companies is very difficult. Money is made when markets are inefficient, or when a company is growing, adding value, and no one has really noticed yet, or there is some underlying factor that has kept its price low. A good PPM will find these opportunities and exploit them on your behalf.

We know time is money and money is time, so it does pay to have a fund company with the capital to do this research and that includes the people, the eyes and ears on the ground in countries around the world doing research on the other 48,000. This is where you typically get your biggest bang for your buck. Historically speaking, small and mid-cap stocks (meaning smaller and medium sized companies) have out preformed most large cap stocks, although they can be very volatile (go up and down like crazy…if you don’t like roller-coasters – you won’t be able to stomach these for the most part!)

Who has time to research 48,000 companies? So this is why you hire a team of people who do the research for you and pick up those trades you don’t have time for.

BOTTOM LINE: You need to hire a professional portfolio manager so you can live the life you were meant to live and not be stuck at some desk doing boring ASSets research work and do more important things, like drinking wine with girlfriends!