Investment management is the handling of asset portfolios to achieve specific monetary objectives. Also known as portfolio managers, investment managers assist individuals and institutional investors grow their wealth and achieve short- and long-term financial goals.
The professionals rely on their knowledge and experience to advise clients on how to build portfolios and when to buy and sell certain assets to maximize returns. Stocks, bonds, equities, precious metals, and artwork are the most common assets that investment managers handle for clients for a fee. Effective asset allocation, timely decision-making, and portfolio diversification are essential for successful investment management.
Despite being popular as a service suitable for high-net-worth individuals, income earners benefit from investment management since it is a practical approach to building generational wealth. Inflation threatens the value of cash and funds in the long run. A portfolio manager can help protect portfolio holdings against economic uncertainty and offer expert advice on growing assets.
Financial experts claim one should hire an investment manager when planning major life events like weddings or when starting a family. It is also advisable to consult portfolio managers when planning for asset rebalancing, when considering retirement, when handling inheritance, and when one is unsure about specific investments.
Investment managers suggest several investment options for clients depending on the investors’ needs, risk tolerance, and the asset types under consideration. Traditional investments are one of the options portfolio managers recommend to their clients, which involves buying and selling stocks and bonds. Investors set up brokerage accounts and share access with portfolio managers to enable them to make financial decisions on their behalf.
Alternatively, investment managers can recommend private equity investments to clients. This involves buying stakes from private businesses, particularly those with promising business ideas or desperately requiring expansion funding. The organizations do not trade in public stock exchanges; they pay back investors’ money after an agreed-upon duration. Most entities use investors’ funds to launch new products, acquire new technology, venture into new markets, or hire more employees.
Investment managers also recommend real estate investments to clients. This involves purchasing land, developing property, and leasing spaces. Investors receive rental payments and may enjoy capital appreciation after selling the assets.
Notably, investors can access investment management services using robo-advisors. These digital resources analyze investors’ financial situation, including their risk tolerance, goals, and how much they can dedicate to investments to suggest suitable asset management approaches. Robo-advisors offer free services to clients, but it is advisable to merge the insights of these digital tools with those of an experienced investment manager to optimize returns.
The investment management process has four primary steps, starting with developing investment objectives. Portfolio managers analyze clients' financial situation, assess their risk profiles, and discuss short- and long-term goals.
Asset allocation is the next step, where asset managers develop investment portfolios using investors’ financial profiles. These professionals categorize assets into different groups and often advise clients on diversification to mitigate the risk of total losses in case of financial shocks.
Portfolio managers proceed to develop investment strategies to meet investors’ objectives. This phase involves transacting with investors’ assets to generate active and passive income.
The last step is tracking and managing clients’ portfolios periodically. Investment managers review the performance of assets to determine whether they align with the short- and long-term objectives. Depending on performance, risk tolerance, and market volatility, portfolio managers can also alter asset allocation at this phase.
