We as retail investors having small capital used to feel inferior. But this article is going to turn you around if you know your advantages over fund managers having large capital. You got to always remember that:
- Fund managers have too many limitations even though they are overseeing large pool of fund entrusted to them. They are limited, first but not least, by the objectives of the fund they are managing. For example, if they are overseeing a fund that invest purely in oil and gas sector of the economy, they have to stay with oil and gas sector no matter what season oil and gas industry is having. If oil and gas industry goes bearish, their portfolio will go down together with the industry. While as retail investors, we can choose to stay away from that fund opportunistically.
- Secondly, fund managers have to employ the minimum amount of their capital to stay invested. This is stated in their fund house investment prospectus. Or else they would deem to have failed in their job duty. Whereas we as retail investors, we can stay fully cash (100%) with our capital whenever we see the storm is forming on the horizon.
- We as retail investors can have the freedom to sort out all the available funds on the market and choose according to our analysis and experience. Those funds become highly selective in the eyes of retail investors. We are free to choose whichever fit our time and season.
- Even if we have invested our capital to a certain fund according to our initial assessment, we have the freedom to change our mind if thing does not work out according to our desire and will. This is another added advantage we all have to know. NO ONE IS OBLIGATED TO STAY WITH A DROWNING FUND FOR LIFE.
- Though market timing may not be a good advice or investment practice when we do investment with stock. Because no one can time the market accurately. While this is true, however, investing through unit trust as a slow moving instrument, time and season can be worked out quite easily comparatively. Because unit trust NAV tends to move according to general market trend rather than individual mood or hike. This is a great advantage in avoiding emotional influence over our investment via unit trust.
- Retail investors also can and have to stay active in observing the market condition for changes or taking full advantage of all available opportunity as they come.
- Investing in stock can have the possibility to increase our capital fast. While investing through unit trust can only bring in sluggish increase for our capital. So investor in unit trust should be done with vigilant attitude and flexible strategy. This is the only way to overcome disadvantages of investing in a slow moving instrument as in unit trust.
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