Funds Management

Having funds is fun. What you do with them, however, takes some thought.

Managing your funds well leads to "free money," and managing those funds poorly leads to owing people dough...or worse.

For the most part, we trust banks to hold onto our money for us. We deposit our paychecks, we pay bills and buy stuff from our accounts, and we depend on the banks to make sure that whole process flows smoothly. But who makes sure the banks are being responsible with our money? Who’s in charge of making sure that, if we go to the ATM and pull out $200, the bank has $200 to give us?

Banks aren’t the only ones putting the “fun” in funds management. All financial institutions need to make sure they have invested the money in accordance with the wishes of their investors, as likely detailed on the indenture of the fund itself. Young people with a long investment time horizon generally lean toward investing in smaller growth companies, which do well over time, but are relatively volatile on a year-to-year basis.

Old people with a toe or more in the grave already can't afford to take short-term volatility risk, so they tend to want their funds managed in safe bonds and/or cash stuffed under the Serta.

And the difference of even a modest number, like 5% a year, in fund management prowess, over a few decades of savings, is the difference in retiring at 72 with a million bucks...or with three million bucks, which can buy you a lot of fun.