Are you looking to improve the profitability and overall value of your organisation? We have got you covered! This guide will aid you in personal financial planning and make you learn everything you need to know about handling financial assets.
Let’s first get to know about the investment management definition!
What is Investment Management?
The first thing to understand about investment management is that it is not a product but a process. The process empowers the investors and allows them to meet their investment management policy and strategy objectives by deploying capital in an ideal combination of financial instruments and other asset classes.
The investment management process refers to managing financial assets and other investment classes, including buying and selling. Here, the term ‘management’ represents devising a strategy, be it long-term or short-term, for acquiring and disposing of portfolio holdings.
Not only financial assets, but the process includes banking, budgeting, and tax services.
The primary types of investments include:
A) Publicly traded securities (Stocks)
B) Fixed Income Products, including bonds
The objectives of investment management rely extensively on understanding your clients’ requirements, policies, guidelines, and government restrictions. It is very important to gauge these factors as the asset allocation strategies change dynamically alongside the market conditions.
Investment managers carry out the investment management process to accomplish defined investment goals. The investment managers are held responsible for managing endowments for pension funds, retirement funds, or other types of investments for corporations on employees’ behalf.
The impeccable service that covers investment risk management is provided by various top-notch brokers & financial planners, wealth management companies, and mutual fund companies, empowering them to build custom portfolios for their clients.
Key Takeaways
- Investment management is the process of protecting investors’ hard-earned money from being eroded with time due to extravagance users and volatile market conditions.
- The process facilitates investors’ money to grow over a certain period to meet an individual’s financial requirements.
- The companies providing investment management services manage publicly issued fund shares, both open-end and closed-end funds.
- The investment management process focuses on devising strategies and executing trade options for the client’s financial assets or portfolio.
The Role of Investment Managers
The primary purpose of investment managers is to meet the specific investment goals of their clients to their advantage. Only the investment manager is fully responsible for managing the client’s investment portfolio and deciding how to divide the client’s portfolio into diversified investments to minimise risks and ensure stable returns.
In addition, investment managers also offer their services as financial planners by providing advice on topics like tax assessments, insurance, cash-flow management, estate planning, etc. They also work for high-net-worth individuals, address their investment management requirements, and coordinate other professional services like accountants and lawyers. When the managers provide these types of services, it is referred to as wealth management services.
Importance of Investment Management
The sooner you get started with investment management services, the better it is. Opting for the investment management process helps you build wealth and increase your net worth.
Cash loses value over a period because of inflation. So, making planned investments is pivotal if you want to narrow the wealth gap and grow your money to meet your long-term needs.
Moreover, the investment management team makes all financial decisions by themselves, without burdening off your shoulders, while offering you lucrative opportunities to amplify your returns on investment. These are the professionals providing specialised services in letting you decide to invest in certain products that are beneficial for the long term, using personal experience and tech-powered analysis tools.
Thus, opting for investment management firms and to avail their services benefit investors immensely as it allows them to take the right decision and steer clear of financial risks.
Did You Know?
Many responsibilities are attached to running an investment management firm; the company must appoint skilled managers to market, deal with, prepare, and settle reports for clients. Other tasks the investment managers are responsible for include researching individual assets and conducting internal audits.
How does Investment Management Work?
The investment management firm you choose will require you to open an investment account. However, if you already have an existing account running in other firms, such as brokerage accounts, IRAs, or retirement plan assets, they will allow you to switch your funds from an old to a new account.
The investment decisions of a manager are based on a variety of factors, starting from the saving goals to the time frame. Your answer will allow the investment manager to assess your ability to endure the market’s price swings and the high volatility of the stock market.
Other critical factors determining a manager’s investment strategy include fees, tax efficiency, market conditions, etc.
Should you Consider the Investment Management Process?
The portfolio of an investor needs to be monitored by professional investment managers. It implies every investor must consider the investment management process for higher security and reap the best returns from their financial assets. However, there are some downsides related to investment management.
Want to know the upsides and downsides? Here we go!
| Pros | Cons |
| Full Time diligence | Profits are uncertain due to the highly volatile market. |
| Proficiency in protecting the portfolio in the times when the market is facing extreme downside | Considerable fees |
| Professional analysis | Issues from passively managed vehicles, and robo advisors |
| Ability to outperform the market |
Word To Remember
Investment banker
Investment bankers are financial advisors responsible for raising money for their clients. They provide financial services to government and private corporations. These individuals primarily deal in floating a bond, issuing a stock, arranging the sale of the company, and negotiating the acquisition of a rival company.
Conclusion
The profession of investment manager has its challenges. It is not as easy a profession to handle as it seems. They are held responsible for their clients’ portfolios, no matter the situation. It is a job that does not have precise science, and even the highly experienced and proficient managers fail to predict the market meticulously.
In times of financial turmoil, when the clients’ money dives, it can often lead to massive conflicts.
Investment management is the best way to enhance your returns and mitigate your risks. It provides a strategic view of multiple financial asset classes that maximise your portfolio’s potential to reap profits.
Now you know the meaning of investment management and all the crucial information enabling you to manage your portfolio and financial assets better. So, what’s stopping you? Go for it, and hire an investment manager today to maximise the potential of yielding returns from your financial assets.
FAQs
Investment managers, also known as asset managers or funds managers, serve as the engine room of pension funds, retirement funds, investment funds, and many other savings/investment schemes. They help their client’s money grow to allow them to achieve their goals and fulfil their ambitions.
You will need to hire a professional if you are a business owner, specifically when dealing with complex issues, such as retirement income planning, inheritance, legacy planning, or tax strategies – managing your financial assets and analysing your requirements, such as debt management, insurance, taxes, cash-flow planning, portfolio management, etc.
Following and executing the investment management process can help you save 20% of your yearly income. People know the importance of investment management and realise that it adds value to their lives and portfolio by letting them identify robust investment ideas, matching specific investments with personalised goals of investors, and structuring their financial assets to maximise their potential and eradicate risks.
Key skills required to become an investment manager include:
Analytical and Problem-solving skills
Team Working
Time management skills
Self-motivation
Determination
Confidence
Ability to work effectively under pressure
Good numerical and IT skills
An investment manager is responsible for making the investments (buying and selling) on behalf of their clients. In contrast, fund managers are solely responsible for implementing a fund’s investment strategy. However, both of them make their decisions after conducting comprehensive market research.
Listed below are the different types of investments or asset classes that you can choose from, including:
I) Growth Investments
II) Fixed Interest
III) Cash
IV) Defensive Investments
V) Property
VI) Shares
Also read about Portfolio Investment on Investment Simplified.
