When An Investment Sours, Whose Fault Is It Anyway?

Credit: Wisconsin Timber Rattlers Team Photographer - Jeff Isom

My colleagues have in the past highlighted the idea that the fund management industry might not actually be adding much value for investors.

Not only are fund managers underperforming the market most of the time, investors in the funds also end up getting charged expensive fees for the underperformance.

Yet, the fund management industry is still around and has a large presence. Why is this the case?

There is no obvious answer to the question but one of the most interesting responses I’ve heard is that fund managers exist so that investors can pass on the responsibility of managing their own money to someone else and thus have a target to blame should things turn sour.

Although that was just a random comment I heard somewhere, I do feel that there is some truth in it.

If we had bought into a mutual fund and its value subsequently dropped, it’s easy to blame the fund manager and then angrily (but easily) switch funds. But, if we were managing our own money and we had experienced a similar drop in value in our self-picked investments, it’s not only our wallets that shrink – our egos get hurt too.

That being said, I believe that only by taking ownership of our own investments can we truly achieve long-term investing success. When I talk about taking ownership, it is not so much about managing our own money, but rather, the realisation that regardless of whether we invest through a mutual fund or on our own, we are personally responsible for the subsequent results.

After all, we are the ones making the investing choices.

This line of thinking also matters because psychology works in a funny way. By realizing that we are responsible for our own investments and their results, every decision that we make on the matter – be it choosing a fund manager, an investment newsletter, or an individual stock – will be done more prudently.

And with more effort being put into our investment decisions, instead of just treating it as an after-thought, we might then stand a better chance of reaching our personal investment goals.

Foolish Summary

Investing is an easy skill to pick up but it’s not that easy to master. The first step toward mastering investing is by taking full ownership of our investment decisions.

Doing so will result in an exciting and rewarding journey and you can count on The Motley Fool to be by your side on your investing adventure. So, let’s get started on your 13 steps to financial freedom!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own any of the companies mentioned above.