Concept of Investment Management
Investment management is an essential
factor for businesses and individuals. Its concept mainly refers to handling
financial assets and all investments that are included in any financial
activity. Management includes creating a short-term or long-term strategy for
gaining and disposing portfolio holdings. In addition, this management also
includes budgeting, banking, and tax services and duties. Thus, it is also
known as portfolio management, money management, or wealth management.
Furthermore, investment management helps individuals to protect their hard-earned earnings from being eroded with time due to amenity uses. It also helps increase money over a certain period to meet the financial needs of individuals. The term often refers to addressing the holdings within a specific investment portfolio and trading them expertly to achieve the investment objective.
Basics of Investment Management
● Investment
management mainly aims to meet respective investment goals for the financial
benefit of the clients.
● Investment
management clients may be institutional or individual investors such as
retirement plans, pension funds, educational institutions, governments, and
insurance companies.
● Services of
this management include stock selection, asset allocation, monitoring of
existing acquisitions, and portfolio strategy and execution.
● It also
includes financial planning and advising assistance, managing a client's
portfolio, and coordinating it with other beneficial assets and goals.
What is the role of investment managers?
The term investment manager is used for
a person or organization that invests and manages the security portfolio on
clients' behalf. Investment managers, also known as asset or fund managers,
generally handle all activities associated with managing client portfolios. The
role of these managers is to develop an investment strategy to meet the
specific goals of particular clients. It is also their job to use their
strategy to determine how to split the client's portfolio among various
investments, such as bonds and stocks. Moreover, the investment manager
purchases and sells the investments for their client as needed and scrutinizes
the portfolio's performance.
Features of an ideal investment program
A good investment program is one that is
consistent with the investor's objectives and would enclose all the advantages
of a fruitful investment. Some of the essential ingredients of an ideal
investment program are mentioned below:
- Safety of funds: One of
the essential elements of a good investment program is the safety of
invested funds. Safety of the principal amount signifies defense against
any possible loss under changing conditions.
- Stable income:
Investors should always invest funds in those assets that provide stable
income. Income regularity is consistent with a good investment program.
However, the income should be not only stable but also sufficient as well.
- Capital growth:
Capital appreciation is one of the crucial principles of investment. So,
investors should invest only in growth stocks by identifying the
connection between capital appreciation and industry growth.
- Legality:
Investors should only invest in those assets which are entirely legal.
Illegal investment may land the investor in big trouble.
- Tax implications: When
designing an investment program, an investor should always consider its
tax implications.
Key Takeaways of investment management
● Investment
management is the authorized process of handling financial assets and
investments by competent professionals for clients.
● Professional
investment managers' clients can be either institutional or individual
investors.
● Investment
management encloses devising strategies and conducting trades within a specific
financial portfolio.
● Those
investment management firms that handle over 25 million in assets must be
registered with the SEC and take fiduciary responsibility toward their clients.