- Helping savers apply self discipline is also a simple but effective way to add differentiation. Just as with losing weight, there is no shortcut to amassing investable assets. Money holders need to start by putting money aside, which requires discipline. There are business models that encourage such discipline, including certain retirement pools, e.g., 401Ks, which charge penalties for early withdrawal. This has two benefits: it allows the money manager responsible for the 401Ks to make long-term investments, and it also increases the likelihood that the retail investor will have more money for retirement. Many advisors automatically withdraw each month an investment allowance from their customers’ bank account.
- Thematic investing takes the guesswork out of the equation: Traditional investment consultants offer very granular tools to diversify along the investment spectrum. Today, some money managers offer highly targeted funds for money holders who want carefully defined target sector exposure. For example, Motif Investing enables individuals to invest in a given theme (a “motif”), e.g., all stocks that benefit from a theme of the ‘connected car’. Investors can effectively custom-design their own fund according to any theme that they believe in. Investors may also look for target exposure to markets that they cannot easily trade, such as frontier markets which may not be open to regular investors. for example, Himalaya Capital offers access to Chinese Equities. Shehzad Janab’s Daman Investments hedge fund provides access to the UAE market. These targeted opportunities can, at times, outperform developed markets. However, investors should be prepared to accept local economic risk, political risk, low liquidity and well as lack of diversification within the themes.