How should investors pick portfolio managers?


Many investors rely on active managers to pick stocks, but picking the right active manager has its own challenges.

At Covestor, our team is bringing the principles of successful online marketplaces to the investment management industry.

Investors are able to compare the costs and style of managers with transparency and liquidity. Amazon.com shows us how comparison shopping has become popular and effective in almost every industry vertical.

In the financial services sector, consumers of products such as insurance and mortgages have already benefited from online marketplaces.

A new way to invest

We think our unique approach to active investing can help resolve the difficult and uncertain process of trying to identify and pick appropriate managers. Many investors are tired of paying higher fees to investment managers who can’t beat the index.

Most of the managers on Covestor’s platform have the freedom to go to cash or short stocks, so investors can potentially make money even in a down market. Some mutual fund managers are required by prospectus to be fully or nearly fully invested.

True fee transparency

The opaqueness of mutual funds makes picking managers even more difficult. Mutual funds only disclose their holdings on a quarterly basis with a significant lag time. In other words, investors may be in the wrong strategy for them and they don’t even know it. Furthermore, some active managers charge high fees even though their holdings vary little from popular benchmarks such as the S&P 500. This is known derisively as closet indexing.

AdvaniAsheesh

Asheesh Advani, CEO of Covestor

I’ve always felt that keeping fees low is the one decision that a client can control, so Covestor is designed with this in mind.

In particular, our platform offers low-cost trade commissions and management fees, combined with the ability to own securities directly in a separate account.

At Covestor, the holdings of portfolio managers are transparent for clients, who also get easy-to-understand performance and risk reporting, clear language and no hidden fees.

Our account statements are straightforward and provide additional value to clients such as providing articles and commentaries written by portfolio managers to explain their buy-sell decisions and views of the market.  And according to recent research from Corporate Insight, the transparency and low fees of online investing platforms such as Covestor are appealing to more investors.

Covestor has continued to grow our online marketplace by making it easy and cost-effective for investors to get access to active investment managers, while maintaining full liquidity and higher transparency. Learn more, or join us now.

Continue learning: What the investing gurus won’t tell you about past performance

Read more about our investment philosophy. Also, see why Sanjoy Ghosh, Chief Investment Officer of Covestor, thinks active management is alive and kicking.

Disclaimer: All investments involve risk and various investment strategies will not always be profitable. Past performance does not guarantee future results.

Author profile

Asheesh Advani
Asheesh Advani
CEO, Covestor. Asheesh is an entrepreneur and business builder. He started his career as a consultant with Monitor Group and the World Bank. He subsequently founded CircleLending which helped pioneer the business of peer-to-peer loans and was acquired by the Virgin Group. From 2007 to 2009, Asheesh served as CEO of Virgin Money USA, the American arm of Virgin’s consumer financial services business. Prior to joining Covestor, he served as Global Head of Financial Advisor Products at Lipper, a Thomson Reuters company.

Asheesh serves on the Financial Advisory Committee of St. Antony’s College at Oxford University, and is on the board of Young Presidents’ Organization in Boston, CFED, and Babson Global.

Asheesh is a graduate of the Wharton School at University of Pennsylvania and Oxford University, where he was a Commonwealth Scholar.