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Cloning Investments

How to pick an investor or group of investors?

After learning the basics of cloning investments, let us all agree cloning can be a big-time saver and save us from rigorously time-consuming financial analysis. But the question is: Whose investments should we consider cloning? How can we choose an expert investor or fund manager? 

 

Everyone has their tastes and preferences when choosing fund managers or individual investors. When choosing an investment, an investor's philosophy, their knowledge about the markets, their age and public image all will matter. We have listed out 5 key factors which we should look for when selecting an investor:

  • Good track record – Investors must always examine the past performance of a fund manager through multiple market cycles Thereafter, the returns must be compared with an appropriate benchmark to check whether the investor has outperformed/underperformed the markets historically.
  • Background – Investors must check the background of the fund manager as well as the organization/group to which he belongs. Signs of corporate governance issues as well as a troubled history must be taken seriously and must be avoided for investment purposes.
  • Investment philosophies – Look for strategies that suit your tastes & preferences. Avoid ones that you don’t feel comfortable investing in. For instance, it is better to stick to debt funds if you are a highly risk-averse investor.
  • Current Holdings – Current holdings are important to check for a couple of reasons. One is to ensure that if that investor is following his mandate or not. For example, if the mandate says that a fund manager is supposed to be following the value strategy for that fund but their holdings show that he/she is following the growth strategy, then this is a point to ponder over. Secondly, the investor can assess the quality of companies as well and check if he/she resonates with the investment style of the manager.

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