Asset Selection Loss

The benefit of professional management has a downside which cannot be negated by researching their skill level. Asset Selection Loss is the lack of control over investments owned by funds. You have elected to place your finances in the hand of an investment team. This team is obligated to act in your best interests but it is not required to engage your suggestion, opinions, or requests.

Asset selection loss means that if you think an investment in the fund should be sold, they won’t listen. If you think an investment should be purchased by the fund, they won’t listen. If you think there’s some crucial potential opportunity, they may listen to you. But they will only invest on their preferences. Asset Selection Loss also means you can also expect them not to acknowledge your morals, economic leanings, religious beliefs, political opinions, or any other social ideologies. Unless you are engaged in a social fund which already aligns with your feelings, they don’t care. If they want to invest in high pollution industries, weapons development, banking, “exploitative” industries, fur trade, sexual products, pornography, or any other activity you find immoral, they will make that choice. The only thing you can do is withdraw from the fund.

Mutual funds occasionally publish listings of their investments. This occurs at least once a year. During this time period you can pour through the fund’s offerings and determine whether you are uncomfortable, for whatever reason, with fund holdings.