Outsourcing in a Market That Rarely Trends Here's why fund managers outperform 'do-it-yourself' investors.

"Markets trend only about 15% of the time; the rest of the time they move sideways." This quote from legendary investor Paul Tudor Jones exemplifies the challenge that most investors face – finding that elusive upward trend in a market that often offers no consistency.

For the 'do-it-yourself (DIY) investor', managing personal investments offers a sense of control, as you decide what to buy, when to sell, and where to allocate resources. However, control doesn't always translate to success, especially while pursuing that 15% of market action. It can be burdensome when it feels like your investments are standing still at all other times.

The truth is most DIY investors lack the time and tools to deeply analyse market conditions, especially when markets are stagnant or volatile. For less experienced investors, this leads to frustration and often results in panic as they wait for a small, rare, and fleeting window of upward momentum. With a full-time job, family, or other commitments, constantly monitoring markets and trying to determine the most ideal decision can be overwhelming – but it doesn't have to be.

Related: The Do's And Don't's Of Doing Business In Dubai

Enter Fund Managers; Experts Equipped for All Market Conditions

Professional fund managers are equipped with the research, tools, and strategies to adequately manage that other 85% of the time when markets are moving sideways or experiencing volatility. From sophisticated risk management software to algorithmic trading models that identify opportunities in undervalued assets, their approach isn't just about finding an upward trend - it's about generating value in all kinds of market conditions. Warren Buffett's long-term value investing approach of looking for companies with strong fundamentals, even if they're currently undervalued or operating in flat markets, is a prime example.

In 1988, his company, Berkshire Hathaway, invested in Coca-Cola when it only had a market cap of US$16 billion, the company wasn't trending, and other investors were overlooking its potential. His foresight to have Berkshire Hathaway purchase these shares at the time is undeniably reaping rewards almost four decades later; in August 2024, the powerhouse beverage company reached a value of nearly $300 billion. Similarly, during a difficult period in the 1960s (now dubbed the "Salad Oil Scandal"), Buffett invested in American Express when most investors avoided it and reaped significant rewards later.

These examples reinforce that skilled fund managers don't just react to market trends but rather anticipate them through deep research and analysis. They can spot opportunities in sectors or geographies that most DIY investors might overlook while also understanding when it's time to shift focus. Whether it's reallocating assets to a sector that's showing early signs of growth or moving away from stagnating investments, experienced fund managers make these moves effectively.

Related: The Top Five Challenges Of Doing Business In Dubai

Strategies Beyond Trends

Fund managers excel at generating returns even in stagnant markets, while DIY investors often wait for upward trends. By deploying strategies like diversification, tactical allocation, and hedging, fund managers can turn periods of market stagnation into opportunities for consistent growth. This is how George Soros made his claim to fame.

One of his most famous trades, "Breaking the Bank of England" occurred when most investors were missing signs of significant returns. He strategically shorted the British pound, anticipating its collapse and netting over $1 billion.

Ultimately, fund managers are equipped with the discipline to make timely exits from a position that's losing momentum. This contrasts with DIY investors who may hold onto stocks too long, waiting for a rebound that may never come.

Logic Over Emotion

There's also the emotional aspect of investing to consider. When you're managing your own portfolio, the ups and downs of the market can lead to impulsive decisions. You might sell too early in fear of a dip or hold on too long, hoping for a reversal.

We've already touched on Buffett earlier, but since he's one of the most renowned investors of all time, consider his advice: "Be fearful when others are greedy, and greedy when others are fearful."

During market downturns, while many investors sell out of fear, Buffett's long-standing ability to be logical versus falling susceptible to emotion is what has led to his renowned stature. In the 2008 financial crisis, many DIY investors panicked but he once again invested strategically (this time in companies like Goldman Sachs and General Electric) and profited when the market rebounded.

Like Buffett, competent and trusted fund managers are trained to take emotions out of the equation, relying instead on data and strategy. Their experience helps them avoid the common pitfalls that many individual investors fall into.

Outsource for Excellence

At the end of the day, markets rarely provide the consistent, clear upward movement that DIY investors dream of. Most of the time, building up a portfolio requires more than just spotting a rising stock – it's about managing through periods of sideways movement, volatility, and uncertainty.

Outsourcing to a professional fund manager doesn't mean relinquishing control – it's about leveraging their expertise, insights, and disciplined strategy. With the ability to generate value in all types of market conditions, fund managers can help navigate challenges like sideways markets, where DIY investors often struggle to see growth.

So, while you may feel empowered managing your own portfolio, it's worth considering Paul Tudor Jones' words to ask yourself: are you truly maximizing your potential returns, or is it time to put your investments in the hands of someone who can?

Related: Four Benefits Of Outsourcing Your PRO Services In Dubai