Investor's Passport to Hedge Fund Profits: Unique Investment Strategies for Today's Global Capital Markets

CHAPTER 9

Portfolio Management Applications

Donald Trump recently related an amusing anecdote that illustrates the sometimes-silly ends to which many will go in the search to “get rich.” He said, “A friend called me up the other day and talked about investing in a dot-com that sells lobsters. Internet lobsters. Where will this end? The next day he sent me a huge package of lobsters on ice. How low can you stoop?” Besides serving as a funny little tale, the story speaks volumes about the dot-com bubble and the mistaken emphasis that investors sometimes place purely on chasing returns. Don’t get us wrong; we’re all in this game to make a buck. Everyone wants to beat the market, and we would all like to pick the next Microsoft. As a result, it is not surprising that we find ourselves focusing the bulk of our energy and efforts on accumulation-centered philosophies and strategies, and so little on portfolio management. What most people do not realize in time is that portfolio management is critical to the success you experience in the global markets. Granted, it is far more interesting to read about explosive growth in emerging market countries than it is to talk about the steps involved in creating a portfolio or in executing trades. Still, the portfolio management process does not seem to get enough attention, and expertly understanding it is vital for a hedge fund manager.

Portfolio management involves the art and science of making decisions about investment mix/policy, matching ...