What Do Managers of Mutual Funds Invest In?
This is a most interesting subject. The way mutual funds are promoted is to give the impression that the managers are continually researching stocks and buying and selling then. To some extent this is true. To a larger extent the number of stocks that the manager invests in is quite limited.
When you invest in a mutual fund, you should ask the Manager of that fund, to present you with a list of the stocks that that particular fund is able to invest in. Usually it will be in a specific section, such as the financial sector, or stocks that have a market cap of over a certain large amount in order to make them ‘safe’, or with some other specific criteria.
Guess how few financial stocks there are. Guess how few large cap ‘safe’ stocks there are. Sometimes the universe of stocks is so small that the concept itself is ridiculous. Shockingly, in the supposed interests of protecting the public, the prospectus of a mutual fund specifies what that fund may invest in, and usually the numbers of stocks that are eligible for that fund, are quite small and the manager of that fund may only pick his stocks from this small universe of stocks. It a great job if you can get it. Not too much to chose from and just collect the fees for making those choices.
When you realize just what a limited choice the manager of the fund has available to choose from, you will be shocked. All of this nonsense about safety, diversity and management is usually just that – nonsense that sounds good to the unsophisticated listener.
That indeed is why ETF’s are so much more profitable to the average investor
By Larry Cyna
Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and continues as a strategic consultant to selected clientele.
He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC’s with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section.
He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder’s Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants.
He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm.
Mr. Cyna is well known in the Canadian Investing community. He is invited to, and attends presentations given by public companies usually 3 or 4 times each week. These presentations are intended by the various hosting companies to present their inside story to sophisticated parties and Investment Managers for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being a part of this keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.
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Thanks for the great post.