If theirs is an investment portfolio like that, they’ll begin the process by setting up a trust. Lawyers draw up the documents, and then investment advisers run the trust. The advisers must be people who have never managed the beneficiaries’ assets.
The beneficiaries — that is, the people with the inside information — can set basic investment goals and update them from time to time. But they don’t get to see the individual investments that the adviser is buying, holding, selling or shorting. They are, quite literally, blind to what is going on in their portfolio.
Two Senate Democrats, Mark Kelly of Arizona and Jon Ossoff of Georgia, are sponsoring a bill to limit members of Congress’s trading activity, and they have blind trusts themselves. Unfortunately, their offices would not put me in touch with their lawyers or investment advisers to discuss the trusts’ mechanics or either man’s investing philosophy.
But other lawyers who have set up blind trusts said the vehicles were often a kind of last resort. “It’s a little bit of a pain,” said Bryson B. Morgan, who practices with the political law and exempt organizations groups at Caplin Drysdale in Washington. “There are various other easier ways to deal with conflicts of interest.”
The simplest is to sell all the stocks and other investments that might pose a problem and replace them with diversified holdings — an approach that any civilian can use without a lawyer or an investment pro, as Mr. Morgan’s colleague Beth Shapiro Kaufman pointed out.
“They can buy a certain set of mutual funds that have their preferred asset allocation and rebalance on a preset, periodic basis,” she said. “Then they just have to be disciplined when they get a pit in their stomachs.”
The pit, however, is a problem. While you feel it in your stomach, it starts in your head — and it’s wise to prime your brain with guidelines.
Article source: https://www.nytimes.com/2022/02/05/your-money/stock-portfolio-investment-management.html
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