What is Investment Management and How Does It Help?
When looking to build wealth, one of the earliest questions people ask is, ‘what is investment management?’ At its core, investment management is a holistic term for the management of a group of assets. In most cases, it’s built on a strategy that’s designed to help you achieve your financial goals. Whether you’re looking to retire early, saving for your first home, or considering your first investments, wise money management and asset management is essential.
It may sound like something only a few people can afford, but investment management is for everyone. It’s not limited to extremely wealthy individuals. It’s not just for the super rich. Instead, it’s a time-tested way to invest, protect, and build your money over time.
What are investment management services?
n the most basic sense, the investment management industry helps with the handling of a collection of assets, often called a portfolio. Investment management portfolios include managing stocks, bonds, real estate, or any number of other assets. During the management of this portfolio, a team of experts ensures that it’s helping you reach your financial goals, avoiding unnecessary risks, and properly protecting – and building – your wealth.
Types of investment management
Investment management firms can help individuals with a variety of different assets or accounts. This leads to different types of investment management services based on the asset or account. As your investments start to bring in returns, they can yield capital appreciation, income generation, and tax efficiency for the holder.
Active management involves attempts to outperform market index through research and trading. By contrast, passive management tries to replicate performance of specific market indexes with lower costs. Depending on the account that your investment managers are helping you with, one type of investment management will typically work better than the other. Because investment teams are familiar with a variety of markets and their trends, they will give you the best results no matter what type of investment you’re looking to grow.
What does an investment management firm do?
1. Identify your financial goals
One of the first things investment management firms do is try to understand their clients’ goals and means. During a series of conversations, an investment manager will attempt to discern how much you have to invest, how much risk you’re willing to accept, and when you expect to need your funds.
When paired with financial planning services, more aggressive investment strategies have the potential to grow your wealth faster, but at the cost of a higher risk. On the other hand, safer investments, such as mutual funds and bonds, can grow your portfolio slowly but offer fewer opportunities for quick growth.
And, while many may think that investment management firms are something they can’t afford, they typically only charge around 1% of the managed assets.
2. Discuss investment opportunities
Once they understand your goals, investment managers work to build an investment portfolio that has the potential to fulfill your goals. Placing your financial assets in a range of investments, they aim to minimize risk and maximize returns through a combination of investments. Your funds may be placed in cash accounts, well-known stocks, hedge funds, or a range of other investments.
Of course, your investment advisor will be in contact with you throughout this process. A good investment manager will take the reins and guide your investments wisely, but a great one will involve you in the process, discuss exciting opportunities, and educate you on where your money is going.
3. Provide financial guidance and advice
On the subject of education, your investment advisor isn’t just there to take your money and put it places. Instead, they should act as a trusted guide, someone who patiently listens, seeks to understand your unique situation, and provides you with valuable advice. Because, at its heart, investment management is about preserving and increasing wealth.
Your investment manager can provide useful information about tax strategy, retirement planning, and other wealth management strategies. Ultimately, you want a long-term partner that won’t just manage your portfolio, but will keep an eye on your investment goals for years to come.
And, all of this comes from a thorough understanding of how financial markets and financial institutions work. Most investment management firms work from both experience and research into your industry’s specific markets to give you the best insight and guidance. Investment decisions should always be based on historical data or performance monitoring that ensures investments align with established benchmarks and objectives. That’s exactly what you get when you work with an investment adviser like those at The Wiser Financial Group.
Do I really need investment management?
Beyond asking ‘what is investment management,’ it’s important to understand if – and why – you may need it. First and foremost, if you’re aiming to build generational wealth, investment management is crucial. And, with baby boomers owning more than half of the wealth in the US, it’s well past time to start planning your handoff.
Of course, the sooner you start building, the better, as interest accrues over time and helps to passively grow your wealth. But, interest often isn’t enough: you need savvy investments. By only placing your money into savings accounts, you can actually lose money over time, as inflation will outpace interest. Because of this, it’s incredibly important that you work with advisors to manage your wealth as early as possible.
Advisors can also keep up with changes to the market as they actively happen, because they’re always invested in the growth of your accounts. This rebalancing maintains the intended asset allocation as market conditions change. If you’re always doing the same thing in an investment market, you can either miss out on great opportunities or actively lose money on investments because of a downward trend.
They will also help you with liquidity management to ensure you have access to cash to meet your short-term financial obligations as needed. Simply maintain regular contact with your investment management team, and they’ll help you both grow your accounts over time and stay on top of your current financial obligations without the stress of balancing each yourself.
Ready to speak with our investment managers?
At Wiser Financial Group, we work diligently on behalf of our clients to manage their financial futures. Charged with helping them achieve their financial goals, we take this responsibility very seriously. As a trusted investment management firm, we do everything in our power to help you succeed with your investments. So, if you’ve been looking for help investing and managing your assets, don’t hesitate to reach out to us today.
Are you ready to get started?
If you’re eager to begin your financial journey, the team at Wiser Financial group is here to help.