Strategies For Adding Investment Management To Your Portfolio

Investment management is the process of making decisions about investments. It involves researching, selecting, and monitoring a portfolio of assets that match an investor’s goals, risk profile, and timeframes. Investment management can be done independently or with the help of an investment manager.

There are many types of investment management, including traditional investment, hedge fund investing, private equity investing, real estate investing, and mutual fund investing.

When it comes to managing your investments, you can either do it yourself or outsource it to an investment manager. If you want to manage your own investments, you'll need to decide on the type of account you want to invest from, the types of investments you want to make, and how much money you want to invest.

If you choose to outsource your investment management, you can choose from robo-advisors, online financial planning services, or traditional financial advisors. Each option has its own pros, cons, and associated costs.

Whether you choose to manage your investments yourself or seek the help of a professional, investment management is a valuable tool for anyone looking to grow their wealth and make the most of their money.

Investment management can be done independently or with the help of a professional

Investment management is the process of building a portfolio of stocks, bonds, and other investments to meet your financial goals. You can either hire an investment management service or manage your own portfolio. Here's a detailed look at the options for doing it independently or with professional help:

Doing it Independently

When managing your investments independently, you'll need to make several decisions, such as the type of account you want to invest from, the types of investments you want to make, and how much money you want to invest. It's important to educate yourself about the market and different investment options to make informed decisions. You'll also need to stay updated with market trends and continuously monitor the performance of your investments. This option gives you full control over your investment decisions and strategies.

Doing it With Professional Help

Hiring an investment management service provides you with expert guidance and support. These professionals will work with you to understand your financial goals, risk tolerance, and investment horizon. Based on this information, they will devise a customized investment strategy and build a portfolio of stocks, bonds, and other investments suited to your needs. They will also execute trades on your behalf and monitor your portfolio's performance.

Professional investment managers have extensive knowledge of the market and access to resources and tools that can help optimize your investments. They can provide ongoing advice and make adjustments to your portfolio as needed. Additionally, they can assist with other financial needs such as tax planning, estate planning, and insurance.

Choosing the Right Option

Whether you choose to manage your investments independently or seek professional help depends on your preferences, knowledge, time availability, and financial situation. Doing it independently gives you more control but requires a significant time investment and financial knowledge. On the other hand, hiring a professional provides expert guidance and saves you time, but it also incurs management fees. Consider your goals, resources, and level of comfort with each option before making a decision.

Investment management services include asset allocation, financial statement analysis, stock selection, and monitoring of existing investments

Investment management services are an important part of financial planning and can be done independently or with the help of a professional. These services can help individuals make the most of their money and ensure their portfolios are optimised to meet their financial goals. Investment management services include asset allocation, financial statement analysis, stock selection, and monitoring of existing investments.

Asset Allocation

Asset allocation is the process of dividing an investment portfolio among different types of assets, such as equities, fixed-income assets, cash, and its equivalents. The goal is to balance risks and rewards based on the investor's financial goals, risk tolerance, and investment horizon. There is no one-size-fits-all formula for asset allocation, and it may vary depending on factors such as age, financial targets, and risk appetite. Financial advisors often recommend holding stocks for five years or longer, with more conservative asset allocations for those approaching retirement.

Financial Statement Analysis

Financial statement analysis is a process of evaluating a company's financial health and performance by reviewing its income statement, balance sheet, and cash flow statement. This analysis helps investors make informed decisions about the company's financial status, identify key insights, and assess the company's performance over time. It also aids in risk management and regulatory compliance.

Stock Selection

Stock selection involves evaluating and choosing the right investment managers or intermediaries to help achieve investment objectives. This process includes due diligence, which focuses on understanding how investment results were achieved and assessing the likelihood of future superior results. It also entails evaluating the firm's integrity, operations, and personnel. Stock selection considers both quantitative and qualitative factors.

Monitoring of Existing Investments

Monitoring of existing investments, also known as investment monitoring or oversight, involves regularly evaluating the performance of investments and making adjustments as needed. This may include risk assessments and increasing or decreasing monitoring based on the level of risk associated with a particular investment. Investment monitoring services can be provided by accounting firms, banks, or financial services companies, offering advice on creating investment monitoring plans tailored to the client's needs.

Investment management firms must register with the SEC if they handle over $25 million in assets

Investment management firms in the US that handle over $25 million in assets must register with the Securities and Exchange Commission (SEC). This is a requirement for firms that are not already registered as investment advisers with the state securities authority in the state where they have their principal office and place of business, or are not subject to examination as an adviser by that state authority.

The $25 million threshold was designed to distinguish investment advisers with a national presence from those that are essentially local businesses. However, there is an exception for firms with their principal office and place of business in New York, which must register with the SEC if they have assets under management of over $25 million, as they are not subject to examination by the New York state securities authority.

Firms that are required to register with the SEC must do so within 90 days of filing an annual updating amendment to their Form ADV reporting that they are eligible for SEC registration. They must also accept fiduciary responsibility toward their clients, which means they promise to act in their client's best interests or face criminal liability.

The SEC registration process involves initiating the application through the Investment Adviser Registration Depository (IARD), which includes filing applicable parts of Form ADV and paying a fee.

Investment management is also known as money management, portfolio management, or wealth management

Investment management can be done independently or with the help of an investment manager. Investment managers are responsible for overseeing a client's investments and ensuring they align with the client's goals, risk tolerance, and financial priorities. They may also provide financial planning services and advise on topics such as cash flow management, taxes, insurance, and estate planning.

Portfolio management, a critical investment practice, involves selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client, company, or institution. It requires an understanding of key elements such as asset allocation, diversification, and rebalancing.

Money management, on the other hand, refers to the strategic technique of making money yield the highest interest-output value. It involves tracking expenses, investing, budgeting, banking, and evaluating taxes.

Wealth management, where financial advisors perform financial planning for clients, has traditionally served as an intermediary between clients and investment managers. However, the lines between these services are becoming blurred.

Investment management can be a lucrative career choice with strong growth prospects

High Remuneration

Positions in investment management offer some of the highest salaries in the finance industry. Glassdoor estimates annual salaries for investment managers to be between $51,000 and $200,000 in the United States. The U.S. Bureau of Labor Statistics (BLS) reports that the median annual salary for financial analysts and financial managers was between $83,664 and $134,180 in 2020.

Strong Growth Prospects

The BLS predicts a 5% growth rate for financial advisors between 2020 and 2030. With the increasing variety of financial products and services, there is a growing need for investment managers, leading to more employment opportunities in the coming decades. The BLS attributes this projected growth to the continued need for people to receive investment advice for the future.

Diverse Career Options

Investment management offers a wide range of career options beyond the stereotypical high-pressure trading rooms. You can work as a financial analyst, private equity manager, hedge fund manager, risk manager, stockbroker, portfolio manager, and more. You can choose to work with individual investors or businesses in various sectors, including insurance companies, brokerage firms, investment banks, and credit unions.

Creative and Innovative Work

Contrary to popular belief, investment management is not just about crunching numbers. It involves developing creative and innovative investment strategies tailored to each client's needs, goals, and risk tolerance. You will need to stay updated on changing investment markets and the impact of global events, weather changes, and other factors.

Early Career Start

Most entry-level investment management positions only require a bachelor's degree, allowing you to start your career quickly and reduce your education costs. A bachelor's degree in a business-related field, such as financial management, economics, or business administration, is a common starting point for a career in investment management.

Professional Independence

Investment management offers the opportunity for professional independence, as you can choose to work for an investment firm or freelance. This allows you to set your own rules, customize your work experience, and have control over the type of clients you work with.

Personal Application

The skills you develop as an investment manager can also be applied to your personal finances. By improving your investment management skills, you can enhance your ability to manage your own investments successfully and maximize your earnings.

Frequently asked questions