Investment Management Services
Investment management is the professional "art" of handling a portfolio.
It is also known as asset or money management because it involves buying and selling securities to achieve specific goals for clients in an investment program, typically referred to as a "portfolio."
Whether you are an individual or institutional investor, investment management services will help maximize your portfolio and make managing the risks in it easier.
Simply put, investment management services provide investment advice and recommendations to their clients to achieve specific investment objectives.
The investment manager's main job is to make investment decisions on behalf of their clients, which can include buying and selling stocks, bonds, mutual funds, and other investment products.
They also work to maintain an optimal mix of investment assets for their clients to help them meet or exceed their investment goals.
Different Types of Investment Management Services
There are various types of investment management services that investors can use. Each has its own benefits and drawbacks.
The most common investment management services are:
- Asset Allocation:
A portfolio strategy that spreads investment dollars into a variety of asset categories in an attempt to reduce risk and volatility. - Stock Selection: A strategy that involves picking stocks that have the potential to outperform the market or a particular sector.
- Mutual Fund Selection: A strategy that focuses on choosing mutual funds with the best investment performance and lowest fees.
- Portfolio Rebalancing: A process of periodically buying or selling assets in a portfolio to maintain the desired asset allocation.
- Hedge Fund Investment: A type of investment that uses a variety of investment strategies to achieve returns that are not directly related to the movements of the broader markets.
- Active Management: An investment strategy where a portfolio manager tries to beat the market by selecting specific investments they believe will outperform it.
- Passive Management: An investment strategy that tracks a particular index or benchmark and tries to replicate its performance.
- Monitoring of Existing Investments: Periodic reviews of a portfolio to ensure that the investment mix still meets the client's goals and risk tolerance.
- Portfolio Strategy and Implementation: The process of creating an investment plan and then implementing it.
- Financial Statement Analysis: The process of reviewing a company's financial statements to identify investment opportunities.
- Investment Research: The process of gathering information about potential investments to make informed investment decisions.
How Much Does Investment Management Cost?
There is no free lunch when it comes to investment management. The higher your assets under management (AUM), the more you will pay in fees for professional guidance on those funds.
Managers charge a fee for managing your money, typically around 1%. The firm will debit this from you quarterly.
Your investment manager will make trades on your behalf, but you are still responsible for any fees, so it is important to know that they are not without charges.
Each trade comes with its own fee – sometimes this may be an expense or load on your fund if it is associated with the type of security involved in the transaction.
If you invest $500,000 with an investment manager, they will use that money to buy stocks and bonds or other investments, as determined by what is best for your portfolio.
The transaction fees are taken out of each purchase, while the manager will take a percentage out every quarter for their management fee.
Robo-advisors are becoming more popular for their low fees. Robo-advisor rates typically come in at under 1% per year.
These automated investment services manage your portfolio without any human intervention, which leaves less space when it comes time to oversee things like taxes on investments or withdrawals from funds.
When and How to Hire an Investment Manager
The best time to hire an investment manager is when your investment portfolio is growing and you do not have the time or knowledge to manage it yourself.
Many people wait until they have a large amount of money saved before seeking professional help, but this can be a mistake.
A good investment manager will work with you to create a plan that meets your goals and fits your risk tolerance.
They can also help to monitor your portfolio and make changes as needed to keep it on track.
Investment management is not a one-time event, it is an ongoing process that should be reviewed regularly.
Personal preferences are the key to finding a good financial firm. Do you want full support from your team, or would it be nice if they could provide you with more personal attention?
The costs and requirements of each advisor also need to be taken into consideration when making this decision, because there is no right answer for everyone who wants one.
You can always count on your friends and family to offer advice. If they have worked with the person before, then you know that their recommendations are likely to be right.
Alternatives to Investment Management
Not everyone needs or wants investment management services. Several alternatives can provide similar benefits without the cost.
Index funds and exchange-traded funds (ETFs) are two such options. These investment vehicles offer a way to invest in a basket of securities that track an underlying index.
Mutual funds are another alternative that can provide diversification and professional management at a lower cost than investment management services.
Some people also choose to manage their own portfolios, using online resources and tools to make investment decisions. This can be a good option for investors who have the time and knowledge to do so.
The Bottom Line
Investment management services can be a valuable tool for investors who want professional guidance and support with their investment portfolios.
Fees for these services vary but typically range from 1% to more than 2% of the assets under management.
When deciding if investment management is right for you, it is important to consider your investment goals, time horizon, and risk tolerance.
FAQs
1. Is there a minimum amount I need to get started with investment management?
Most investment managers have a minimum investment amount, typically $500,000. However, there are a few firms that will work with you if you have a smaller investment portfolio. It is also important to note that investment management services come with fees.
2. Are the investments guaranteed?
No, there are never any guarantees when it comes to investing. However, investment management services can help you make informed investment decisions that align with your goals and risk tolerance.
3. Can investment managers also help in investing for retirement purposes?
Yes, investment managers can help you plan for retirement and create a portfolio that meets your needs. They can also guide you on when to start withdrawing money from your account.
4. Can investment managers also help in saving money?
Yes, investment managers can offer guidance on how to save money and reach your financial goals. However, they cannot guarantee that you will reach your goals. It is important to remember that investment management is a process, not a one-time event.
5. What happens if my investment goals change?
Your investment manager will work with you to update your investment plan as your goals and needs change. This is an ongoing process that should be reviewed regularly.
