Mental Models discussed in this podcast:
- Opportunity Cost
- Alpha
- Superpower of Incentives
- Competitive Advantages
- Process vs Results
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Twitter Handle: @TreyHenninger
YouTube Channel: DIY Investing
Show Outline
Key Concepts for selecting a Portfolio Manager
- Choosing an investment manager is a lot like choosing a stock
- Don’t invest in anything you don’t understand - this includes managers
- What is their process?
- How do they earn alpha? Do you need alpha?
- What are your financial needs?
- Wealth preservation?
- Wealth Growth?
- Do you need alpha?
- Not every manager can provide alpha.
- Not every manager seeks alpha
- Not every investors NEEDS alpha
- Value
- Cost - How are they paid? What is the expense structure? How does it compare to alternatives?
- Management Fees
- Performance Fees
- Next podcast will be a whole podcast on fee structure, so I’ll limit my discussion on it here.
- Growth
- Investment managers inherently benefit from growing AUM. This is unavoidable. Regardless of pay structure. However, you want to understand what drives them. Is investing a passion or a money seeking endeavor?
- Are they trying to grow AUM?
- Do they plan to shut down growth at some point?
- Investment managers inherently benefit from growing AUM. This is unavoidable. Regardless of pay structure. However, you want to understand what drives them. Is investing a passion or a money seeking endeavor?
- Quality
- Competitive advantages?
- How are they different from other inves
- Competitive advantages?
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