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That doesn't work. If I'm paid a flat fee to manage money, the people handing me money to manage are still going to look for the manager with the highest retur
by frig 18y ago
That doesn't work.
If I'm paid a flat fee to manage money, the people handing me money to manage are still going to look for the manager with the highest returns (that's human nature).
So, I still have an incentive to chase riskier short-term gains; I see less of the upside than if I were also getting a cut of the gains, but the incentives that arise from competition with other money managers remains in place.
- zupatol 18y agoI think lots of people are ready to forego higher returns for higher security. That's what I ask from my banker. For a short while I was looking for a bank that would just have a portfolio that follows the market instead of trying to beat it, and that would take less fees because it took less effort to manage. I contacted two other banks, but they didn't have anything like that. I found it was extremely tiring to speak to bankers, they all seem to want to drown you with words. I eventually stayed with my original bank just to stop wasting time.
- natrius 18y agoI thought such things were common? http://en.wikipedia.org/wiki/Index_fund http://en.wikipedia.org/wiki/Index_fund
- zupatol 18y agoThey are common. The problems they don't solve is how to allocate the assets between currencies. Also part of my money is in fixed income papers. So even when not trying to beat the market, there are some decisions I would like to leave to a professional.
- khafra 18y agoDimensional Fund Advisors (http://en.wikipedia.org/wiki/Dimensional_Fund_Advisors http://en.wikipedia.org/wiki/Dimensional_Fund_Advisors) diversify among currencies, markets, and asset classes according to some math I don't really understand. They seem pretty sharp, though, and they're low-load for the buy-and-hold version (they have market timing funds designed to lower the fluctuation at the cost of lowering the long-term return).
- JeffL 18y agoYes, maybe after a market crisis more people look for security, but I think that over time they forget the last crises and move back to chasing returns until it gets bad enough for the next crises to occur.