Despite the advantages of indexed investments, many investors like to play a more active role on their own or with the assistance of a financial adviser. This chapter covers three active investment management scenarios: (1) investment selections by the Family CFO, (2) actively managed broker accounts, and (3) actively managed mutual fund accounts. With minor exceptions, the general recommendation for all these scenarios is the same: Don’t do it!
As a professional investor, I usually reserve 5 to 10 percent of my portfolio for my own investment ideas. These investments are often simply an extension of my observations from work, where I have significant time, resources, and a network of professionals to assist in evaluating these opportunities. For most Family CFOs, I do not recommend such an approach, for several reasons: