Different investment management techniques are as common different brands and styles of jeans. Since this site is focused on Mutual Funds as the investment vehicle of choice, the rogue investment management techniques you will find here are as exotic as, say, foreign brands of beer. Sorta special, but not exactly out of reach either.

The rogue investment management techniques you will find here are as exotic as, say, foreign brands of beer.

That is not to say that using the right balanced mutual funds at the right time will not yield extremely favorable results. Likewise, sitting on the right High Yield Investments during recovery periods and switching into Dividend Funds with good track records will similarly make your average, mutual fund investor look like Warren Buffet.

So What are Rogue Investment Management Techniques?

Evidently, the name sounds a lot more exotic than it really is. When it comes to mutual fund investments, investors are buying a basket of funds. There is no picking and choosing when it comes to mutual funds. You get the whole package.

But what about reverse-engineering the investment decision process? Instead of starting with research specific funds, what about finding the specific stock you like, or the stock that all of your best buddies are chatting about at the water cooler and finding out who owns these shares? In most cases, if there is any meat to the security, there will be a mutual fund investing rather heavily into the stock.

Need an example?

Let’s look at Research in Motion, the Blackberry maker. We can start by running a search on this company’s major holders to see just what Mutual Funds own this company’s shares. We will find, as of January 18, 2010 anyway, that Janus, Vanguard and Hussman are among the company’s top 3 Fund owners. Taking Janus’s top fund, the Janus Twenty Fund (JAVLX) as an example, we see that RIMM is actually its second largest holding. The fund is also a 4-star fund (Overall) and is ranked 5-star for 3- and 5-year periods as well.

Deeper research reveals that JAVLX actually has a HIGH risk rating, which is also in-line with its HIGH returns, compared to its peers anyway.

If this fund were to meet an investor’s objective and tolerance for risk, why not buy it instead of dumping all funds into RIMM specifically? That would defy all of the fundamentals of proper asset allocation and diversification and, if all of the investor’s buddies were wrong about RIMM and should have picked Apple instead, then at least this investor will also have a piece of Apple (in the Janus Twenty fund, anyway).

The point is that stock-picking itself is a lot like poker. While skill is indeed valuable, there is a fair element of luck involved with picking the Right stocks at the Right time All of the Time… essentially, this is impossible to achieve, no matter how lucky and intelligent an investor may be. So why not play at the smart table, using proper investment management tactics (achieved through mutual funds) in the process to protect against the potential downside?

Here is a quick video on how you can accomplish the preliminary research through Yahoo! Finance (note: I use Morningstar, so the top holders will differ).

Rogue Investment Management Tactic #1

One Response to “Rogue Investment Management Techniques For Mutual Fund Investors”