BBs’ money is actually money raised from individual investors through funds and investment trusts. Because investing in securities with other people’s money and on a large scale, BBs need to have strict processes and procedures in using that money.
When a fund is established, it must comply with the fund charter with the regulations on the proportion allocated to each industry, the regulation on the maximum proportion allowed to be allocated to a specific share, in addition to performance commitments relative to the reference index.
This will directly affect the strategy (or investment style, style) of the fund manager. For example, if the fund has a target style of value stocks, then the fund manager won’t be able to buy growth stocks, even if those are potentially very profitable stocks.
Because of a lot of pressure from investors, a fund manager will avoid (usually cannot) change his or her style, even during periods when the market is not suitable for that strategy.
On the contrary, as an individual investor, you are completely free to set your investment principles. You also easily choose investment opportunities without being limited to a fixed style, not having to refer to an index. You can easily structure your portfolio by value investing or growth investing in accordance with each stage of the market.
Long-term capital stability
When you invest in stocks, you use the money you save. This amount can be considered long-term because you may not use it for many years, at least 2-3 years.
Stock investment is an area where a long-term perspective is a decisive factor for success. However, the paradox is that people often look at the short-term returns of an investment fund: “The 5-year average return looks good, but how much is the return from the beginning of the year to now?”
Just bad short-term returns can immediately affect the fund’s total assets. For an investment fund (except for closed-end funds), investors can withdraw money at any time.
In order to ensure that investors do not run into the risk of large withdrawals, fund managers must allocate capital into more stocks to minimize risk, while at the same time trying to focus on short-term profits. to “satisfy” customers.