Home Stock Market Funds use the “window dressing” to improve performance.

Funds use the “window dressing” to improve performance.

by Thomas
funds use the window dressing to improve performance

It is a word that many will never have heard but it is a widespread practice because investment funds use the “window dressing” to improve performance.

I hear a lot of people talk about investments, trading, money, Wall Street but the question that many do not know how to answer is: what is the fund to which I have entrusted my savings doing?

It seems like a stupid question but it is not so because it is true that today potential investors through the internet, reviews and social networks are informed about performance and management but then when the individual goes to talk to the financial advisor movie is different.

Why is that?

Funds and their managers use window dressing every 3 months or every 6 months because I imagine you know that there are both technical deadlines such as the 3 witches and a semi-annual budget to assess how “my money is going””

The financial markets I think you have seen have seasonality, the window dressing at each maturity represents an important moment to make the performance more beautiful, in fact the managers of investment funds pay much attention to this part.

Specifically, window dressing is to be interpreted as a report to its customers and any “potential new customers” to give an overview of the performance of the past months.

Managers exhibit in their portfolios the stocks that performed best while at the same time hiding (as far as possible) stocks that performed worst.

Making the accounts of a fund become “beautiful” is a well-known practice, perhaps those who are reading me are not aware or do not believe me, but this is what happen all around the world. Those who read me must be aware of what happens on financial markets, unfortunately during lockdown and in these years of hard work I have seen too many “not honest” people sell and scam people with the promise of earnings.

I hate those who “sell” hopes to those who do not know this work, so my blog has the interest of opening people’s eyes also because as you can see I do not sell courses and I am completely independent.

Back to the window dressing fund managers change the composition of portfolio by increasing exposure to stocks that performed better and selling stocks that did worse.

Why is that?

To demonstrate to its clients and potential new ones the skill in managing investors’s assets.

How do I protect myself?

It is very difficult if not impossible, if you do not have control of your trading account, how do you know what the managers have actually bought? You have to trust and hope, but I do not think this is the best solution, the best choice is to learn how to manage your savings by studying the “mechanics” of financial markets.

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