How would you answer this mutual fund interview question - what is your best and worst investment?

wahoowa1's picture
Rank: Monkey | 52

I have final rounds with a mutual fund next week. They have asked me to prepare my "best and worst investments" to discuss.

Like my previous e-mail, I think that term is totally open to interpretation. How would people define their "best investment?"
- Most P&L?
- Best investment IRR?
- Most mispriced investment you took advantage of, though not necessarily the highest P&L or IRR?
- Most insightful analysis (being right for the right reasons?)
- Best contrarian pick?
- Situation where you had to get active to make things happen?

Love any perspective on this!

Comments (11)

Jan 12, 2017

I think that you can't determine how exactly this question will be asked in advance. I'd prep an answer for every interpretation of the statement you can come up with, then gauge the interviewer's leaning during the interview.

Jan 12, 2017

Yes, that is definitely open to interpretation. FWIW, here are my thoughts. I think as long as you can articulate and defend your best/ worst investments, what you learned from them, etc. you should be ok. If it is for a specific type of fund (e.g. value) I would try and select an investment in that vein. They are likely trying to gauge your critical thinking and analytical skills besides whether or not you made some great returns. They can't verify the trades anyway... being right is great, but were you right because everything in that sector and the market went up, or did you select a superior equity (or bond or whatever) - why and what led you to that conclusion and how did you act.

    • 1
Jan 12, 2017

I actually read this more as a behavioral type question than a 100% performance based Q.

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Jan 12, 2017

Explain more? thanks

Best Response
Jan 12, 2017

I agree, if someone asked me this, I'd answer like this:

"my worst investment was back in (year). I decided to buy XYZ at around $x.xx. My thesis was [insert thesis]. I was wrong because I didn't consider [blahblahblah], I wasn't patient enough, and failed to take into account we were in a bubble. thankfully, I haven't made the same mistake since."

the idea being "this one thing didn't work out for me, but I've taken time to reflect on why it didn't, and most importantly, here's how it's made me a better investor."

for the best investment, I would insert a little humility. for example, did you pick up some AAPL in june 2013 at 60? did you pick up SBUX at <$10 post crisis and hold onto it? or was it a sale? did you sell MSFT in August 1999? CSCO in Feb 2000? I would say something like this:

"the best investment that readily comes to mind is ABC. my thesis was [], and I expected to get maybe 20% CAGR, but instead it tripled in 3 years' time, and continues to be at a low valuation. while my thesis was right, the returns I got were surprising, and I feel fortunate that it worked out that way."

again, the idea here is you need to take credit for a good trade, but you also need to stay grounded. even warren Buffett gets kicked in the nuts every once in a while.

    • 7
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Jan 15, 2017

my worst investment was my former gf

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

    • 3
Mar 1, 2017

.

Jan 15, 2017

best investment is one that you make based on facts/thesis/research
worst investment is one made on emotion, news, rumors, and throwing good money after bad if the position turns red.

Oct 25, 2017

A

Nov 2, 2017
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