Question

Your friend just received a promotion and wants to invest the extra annual income from her raise. She tells you that she is thinking of hiring a fund manager. What should you consider before advising her on this decision?

1) The fees charged by the fund manager
2) The track record and performance of the fund manager
3) The investment strategy and risk tolerance of the fund manager
4) The potential returns and risks of the investment

Answer 1

Before advising your friend on hiring a fund manager, consider fees, track record, investment strategy, and potential returns and risks.

Step-by-step explanation:

Before advising your friend on hiring a fund manager, there are several factors to consider:

1. **The fees charged by the fund manager**: It is important to understand the fees associated with hiring a fund manager. This can include management fees, advisory fees, and expenses. High fees can eat into the potential returns of the investment.
2. **The track record and performance of the fund manager**: Research the past performance of the fund manager. Look at their track record, returns achieved, and how they have performed during different market conditions. This will give you an idea of their expertise and whether they have consistently delivered positive results.
3. **The investment strategy and risk tolerance of the fund manager**: Understand the investment strategy and risk tolerance of the fund manager. Make sure it aligns with your friend's goals and risk profile. Some fund managers may focus on aggressive growth, while others may prioritize capital preservation.
4. **The potential returns and risks of the investment**: Evaluate the potential returns and risks associated with the investment. Consider the asset class, market conditions, and any potential risks highlighted by the fund manager. Ensure your friend is comfortable with the level of risk involved.

By considering these factors, you can help your friend make an informed decision about hiring a fund manager.