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High Return Investments – The Secret Of High Returns
With Low Risk
High
return investments are considered to have a high risk by their very nature, but
it’s not as simple as that.
Risk is not just
related to the investment medium, but also how the investment is managed.
We all want high return investments and we all want low risk.
Let’s look at how to choose a manager that can make you higher returns and
keep risk low.
Risk of an investment.
The risk of any
investment (not just a high return investment) is determined by the following
equation.
Investment medium + management = return.
Driving a
high performance racing car is risky, but in the hands of a skilful driver the
risk is reduced considerably, as they know how to drive correctly and not
crash!
You will often see high risk investments with lower downside
volatility than a supposed low risk investment.
For example, a mutual
fund or unit trust can be more volatile than a higher risk futures or hedge
fund.
The reason for this is its all down to management:
So
when looking at high return investments look for managers who reduce risk. So
what should you look for?
The following list will put you in the right
direction. Some are obvious and some are not!
1.Growth to drawdown
Which would you rather have a manager with 40% annual returns and 15% drawdown
or one with 50% and 40% drawdown? Look for the best balance of risk / reward.
When looking at high return investments look for a balance to
comfortable risk you can tolerate.
2.Length and representative track
record.
Look for track record of reasonable length.
Let’s
face it, anyone can have a lucky streak.
In addition, many mutual
funds do test accounts i.e. they start off managers with small equity, pick the
best and then present it to the public, so look for 3 -5 years minimum.
Also make sure that you check out all accounts that are managed by the
asset managers, so you know performance is representative
3.Drawdown to
recovery Look at any track record and look at recoveries to new peaks in equity
from them.
Obviously the quicker the recovery the better and look for
drawdown recoveries of under 12 months.
4.Active investment.
Avoid buy and hold investments. This is not the way to make big long
term gains, look for managers who are active and not always in the market.
5.Look for performance only managers.
Although it doesn’t
guarantee success, look for managers who will actively take performance fees
only. At least they have confidence in their skill, which is a good sign. Lots
of companies have high management and broking fees that eat into your gains and
they will make money regardless if you win or lose.
A high return
investment is no good if you lose large amounts in fees.
6.Conflict of
interest.
Look for an investment manager that does not earn a cut of
dealing fees. If they do they may be tempted to trade just to make dealing
commission and this may not be in your interest.
Getting a high return
investment that performs is a combination of all of the above and you will do
well to do your homework, keep in mind it is sometimes the smaller asset
managers who work on performance based fees, who will make you the biggest
gains.
Use the above and hopefully you will find a high return
investment that will perform for you and give you the capital growth you are
looking for.
Learn More about a Legendary Trader
Why not
attend one of our FREE Seminars held in London and cheshire.
click here to book on-line or telephone 0161
285 4488.
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All Rights Reserved. Gann Management Limited is authorised and Regulated by the
Financial Services Authority.
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