If you want a high yield investment you need to take into account several factors to see if the investment is likely to hit your target growth. This article will tell you what to look for in terms of picking a high yielding investment manager that could give you 30% + annual profits. Risk, reward & management The fact is, most high yielding investments disappoint and this is generally down to the management Not trading conditions. Many managers blame the market, but that is simply the same as a bad workman blaming his tools. To get a high yielding investment, you must be prepared to take a risk, as of course with risk goes reward. The greater the risk the greater the reward, however management of the investment is crucial. The market is same for all asset managers, but they dont all have the same success in fact: Most discretionary mutual, futures and hedge funds produce poor returns. They always seem to do well and when you invest the performance dives! If you make sure you check the points below your chances of your high yielding investment performing will increase dramatically. 1.Consistency Of performance On any investment its easy sometimes to have short periods of high performance if the market is easy to trade i.e. strong trends are present. Make sure you judge the investment over a three to five year period, to cut down the influence of luck and see how the management performs over a wide variety of trading conditions, not just strong trending markets. 2.Conflict of interest & Fees Fees add up. Make sure to check the performance figures you see are net of all fees. Look at all fees and their impact on results given. If possible, look for a manager who does not get paid a proportion of the dealing fees. This creates a conflict of interest between generating revenue and whats best for client profits. This conflict of interest is a major reason for fund managers failing. The fact that a manager earns fees means he is likely to trade more and create a commission impact on profit and. 3.What is the managers previous performance on ALL funds Many asset managers simply put forward their best performing account. You need to look how all funds under their management have performed overtime. Make sure you look over 3 5 year periods as a minimum. 4.Method of trading Try and find out about the methods that are being used to trade your funds. Generally, the top performing managers will use a long term disciplined technical approach to trading, which aims to liquidate losers quickly and run the big profitable trends. If you are investing in high yielding investment that is aimed at producing higher returns the method of trading is crucial. You need to be confident in its ability to make returns longer term, so you have the confidence to stick with the system or manager during losing periods. 5. Drawdown to profit Look at investment in terms of drawdown as well as profit, as any high yield investment looking for higher returns will have them. You therefore need to look at performance in terms of severity and length of drawdown. For example, if an asset manager produces gains of 60% with a 50% drawdown and another does 40% with a 15% drawdown, the latter is probably the better from a risk / reward point of view. You also need to look at the length of drawdown in terms of peak to valley. If you invested at the worst possible time, how long would it take for you to reach a new high in equity? Some time spent checking the above will be time well spent Picking a high yield investment that is right for you is a case of checking all the above facts If you do, it will increase your chances of success dramatically. |
