Monday, December 8, 2008

Fund Managers Are Lousy !

I attended one pursuing session urging us to take their classes on technical stock assesment.  Half way through the following conversation took place :

speaker : You know who uses our services ? ( Technical Chart )
( pause a bit, no one answer, then speaker continue )
speaker : Profesionals ! ... You know who are the pros ?
( then he continued )
speaker : Fund Managers !
student : but .... its hard to say isn't it ?
student : all those mutual funds drop like hell so they are not any better than us.  How to say they are pros ?

The speaker didn't answer well and almost no one signed up with their offers.

Basically its a matter of size.

I used to sell lemonade when I was a boy.  I made about 100-200% profit a day.  Then when I grow up I built a factory to sell lemonade, I would be happy if I can earn 10-15% a year.

Selling lemonade from my garage required $100 capital while a facotry took up $1 million.  

Things get complicated
when size grows !

It is very hard for a $100,000 guy to understand how to handle $2 billions.

BIG guys like mutual fund managers do have some 'limitations' because they are BIG !
1) They cann't simply buy or sell too much funds by law, coz they may 'manipulate' the market at ease
2) They promised investors to keep '80%' of the fund in the market to qualify as 'quity' fund etc.