What the Fund Managers are Doing

One of the many surprises that has come along with a Donald Trump Presidency is that hedge and mutual fund managers are shifting their focus on what to include in their portfolios right now. It is expected that inflation will occur at a faster than normal pace now that Trump has won the election, and already we have seen stocks move upward at a faster than normal pace as a result of this. This is happening, in part, because fund managers believe that stocks are the better alternative over bonds. This is especially the case with mutual funds as they often turn to corporate and government bonds in order to hedge against losses when the stock market is more volatile than normal. Leading up to November 8th, that is exactly what we saw happen across every major index in the United States. And now, fund managers believe that with normalcy in the marketplace, they need to get well positioned for the next phase of growth.

There is also a shift away from high dividend stocks right now. Many types of stocks, even major companies, offer dividends. However, it is very rare that you see a major corporation offering more than 3 percent per share when it comes to yield. Instead of the high dividend stocks that offer 4 percent or more being attractive to fund managers, they are shifting their focus toward the corporations that will stand to benefit the most if Trump’s policies are pushed through. These include companies that deal with raw materials, industrial stocks, and even some financial stocks. The appeal of a steady return through dividends can be nice because it smooths out the volatility of a constantly moving price, but if a company is going to rise beyond what the normal increase would be plus the high dividends that some offer, then this is the right move.

As a day trader, it’s often helpful to think of your trades as if you were managing a hedge fund of your own. Just like a fund manager, you have the freedom to choose which routes to pursue, and which to back away from. And just like in a hedge fund, you have the ability to use alternative trade tools to help grow your money, such as selling stocks short, trading in the Forex market, and using binary options to help alleviate risk if assets don’t move as much as you expect them to. All of these are strong tools. The big difference is that unlike a hedge fund manager, you probably are not going to be moving millions of dollars around per day.

Watching what professional fund managers do when the winds of change begin to blow is a good way to manage your own money. However, this kind of thinking can lead to problems, especially if you are just mirroring moves that have already been made. Unfortunately, if you try this type of a strategy, much of the movement will already have occurred, and you will be receiving table scraps at best, or losing money at worst. You don’t want either of these things to happen.

Instead, if you are going to look to fund managers for help, you should be learning their strategies and then learning how to apply them in the future. For example, with a Trump Presidency, we are seeing that managers believe certain companies—those described above—will outperform high dividend stocks thanks to increased inflation rates. Taking this principle and applying it to your own trades will help you begin to make money in a similar way to what these professionals do, but on a smaller scale.