The way you have been investing in your retirement account for the last 30 years worked perfectly. Now you have all this cash and the rest of your life ahead of you, but who do you choose to help manage those funds for the next 30 years? A good retirement investment manager will help you watch your funds and investments after you retire.
While your investments were geared for making you money over the long haul, you now need to switch that strategy to help make money in the short term. While past returns are no indication of future performance, many people try to base their decisions on what kinds of returns were done in the past. For instance, if you had an investor who just went with his gut instinct and you made 30% on your investment and you had another investor who knew and understood the markets, guaranteed and produced a 15% return on your investment, which one would you choose?
While that large 30% return looks enticing, the investment manager who went with his gut could have also produced no return, or even worse, lost your money. The 15% return looks less than exciting, but the investment manager knew exactly what he or she was talking about. If they could promise you 40%, you have a good reason to believe that they can get that return the next time. This is why it is more important to base your decision on investment managers who really understand what they are trying to accomplish instead of winging it using past performances.
Here are three qualities many of the Ivy League Endowment investors look for in their investment managers. And if the big boys look for these qualities, it doesn’t hurt for individuals to do the same when it comes to picking out a retirement investment manager:
These returns must be exceptional. Risk-adjusted returns basically compare the amount of risk used in order to generate the return, which help investors to compare investments as apples to apples. It is basically like the difference in total score and degree of difficulty in a gymnast’s or ice skater’s routine.
Taking a look at not only how a company is doing financially, but what a company is all about, is a big factor in making investment decisions. Investment rationale is the ability to look past the “hype” and figure out if a company will be around and doing strong for a good number of years.
This is where Ivy League investors look at how well investment managers take note of what their clients want and stick to the plan as well as possible. Customer satisfaction is based largely in how well a company sticks a stated investment style and preference.
Keeping these qualities in mind will help individuals looking to find the perfect retirement investment manager. Your retirement is extremely important, so it is imperative that you find someone who knows what they are doing, are able to explain every step of the way, balance risk and return, look beyond the stats, and keep you in their best interest when making decisions. Pick several top choices for your investment manager and sit down with them. Ask them each about their past experiences, but more importantly, ask them how they came to those decisions, because the process matters more than the outcomes.