Many undergraduates covet the job of investment manager. They are taking courses in economics, business, math and accounting and considering getting an MBA degree. Today, portfolio managers may also have an academic background in physics, engineering or biology. Since financial managers are often promoted from the rank of research analyst, a CFA is another designation candidates may work towards. However, there are qualities other than degrees that a good financial manager such as Pete Briger may have.
Research has shown that skillful investment managers are:
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• Correct with their investment decisions more often than they are wrong
• Have the know-how to run their winners
• Know how to cut their losses
Some Attributes of a Good Investment Manager
• The commitment and desire to be the best – this includes competitiveness, which many investment banks and investment groups consider the number one requirement.
• Know your strengths – investment managers should know in which area of investing they have the most appropriate skill set. The top investment managers agree with the advice to invest in what you know.
• Employ excellent research analysts – the analysis has to be in-depth including the company filings and all the footnotes as well as channel checks. It’s also important to talk to other investors.
• Look for alternative views – your view may differ from the consensus. This could be a good thing or you may be missing something. You need to understand the basis for your view and the other view before selecting an investment. Don’t accept analysis that only supports your view. Always seek the alternative view.
• Be able to take advantage of weak stock – it may not be easy, but a good investment manager will be able to turn a loss into a gain by properly reacting to a weak stock. The stock may be solid, and it’s the time to buy more.
• Employ analysts who can write well – they need to be able to clearly communicate their investment views to the manager and client. This is the only way everyone will be on the same page.
• Able to take risks – managers not only need to know their risk tolerance, but also how to manage risk. This means they need to be creative, skeptical, curious and able to admit mistakes.
There are many different types of investment managers. The main criteria for the different positions are:
• The size of the fund – there are small, independent funds as well as huge asset management institutions. These may include endowments at a university or investing for a bank. This position is usually called a portfolio manager or chief investment officer (CIO). A person who invests for a small company is called a fund manager.
• The type of investment vehicle – the most common investment vehicles are pension funds, trust funds, retail or mutual funds, hedge fund products, institutional funds, commodities and high net worth investment pools.
• The style of investing – the most common styles of investing are hedging techniques, large or small cap specialties, growth or value style, international or domestic investing.
An investment manager must make the final decision. This is where knowledge, confidence and skill enter the job. Success means they have made more right decisions than wrong ones, and that their wins make more money than their misses lose. If you want to enter into the world of investment management, research shows you need to hone your financial skills.
Image credit: forbes