10 Things To Know About Investment Management

what is investment management

What comes to your mind when you come across the word investment? Most individuals will define it as the act of buying and selling assets at a higher price. Some may think of purchasing or building something that pays dividends over time, generates passive income, or appreciates in value.

While there is some truth in that, investment management is limitless. It also involves handling funds, financial assets, and a strategy to obtain and dispose of the portfolio holdings.

Investment management may also include budgeting, banking, and taxes, to mention just a few aspects.

So, what is investment management, and how can it help you improve your returns in investment? Here are 10 important things to note about investment and hiring expert managers.

1. Investment Management Is All about Identifying and Meeting Goals

Investment management aims to help you reach your goals by maximizing the returns on the money invested. The higher your return on investment (ROI), the better an investment is.

In business finance cases, investment management ensures that your business assets are utilized to the maximum and that they are well-maintained.

From an individual perspective, investors want to ensure that they get returns higher than their initial investment capital.

For instance, if you have $500 that you wish to invest for a year, your expectation is for the amount at the end of the investment period to be higher than $500.

Before embarking on your investment journey, you should identify what you wish to achieve. Establish your goals and articulate them to have a clear image of what investment success means.

When coming up with investment goals, there are three aspects to put into considerations. These are your age, lifestyle, and income.

Establish where you want to be financially in the next few years. This will help you determine the amount of risk you are willing to take in your investment journey.

When it comes to income, note that you can only invest what you have. Income dictates your investable assets and how much you can comfortably afford to put away.

Lifestyle is also a critical determinant of your investment goals. Understand what makes you happy and how much you are willing to sacrifice to live your desired life.

With this information, it will be easier for you to come up with effective plans to help you reach your goals at the end of the investment period. Using investor management software can help you detail an investment plan and stick to it during uncertain times.

2. Investment Management Guides You When Developing an Investment Plan

You cannot possibly meet your goals in life if you lack a strategy. You need to identify the right path to success, and that is precisely what investment management is all about.

If your primary goal is to start a business in the next two years, or you aim to buy your dream house by the end of the investment year, you need a plan to steer you in the right direction with your investment.

A plan is crucial, especially for novice investors. At this stage, they will learn everything they need to know about how to invest before taking risks. They get answers to common questions such as what financial goals are a particular investment earmarked and how long will it take.

An investment plan is more like a roadmap. You will use it to establish if a particular investment is leading you in the right direction. If not, you better terminate your investments before it is too late and the losses pile up.

3. Investment Management Helps You Make Sound Investment Decisions

The best investments are long-term. Therefore, you should put in the money you are certain you won’t need any time soon; otherwise, you will never reach your financial goals.

Money is often best suited for savings or paying debts. This is mainly because investments come with risks, and profits are not guaranteed.

In some instances, you end up losing even the initial investment capital. This means that you might be forced to get into debt if you had planned to use the funds somewhere else.

It is, therefore, crucial to have an emergency fund to cater to unexpected expenses. Moreover, your savings should cover at least six months of living expenses in case of any mishap.

The other area to prioritize is the credit card. Ensure that you pay off credit card debts before getting into an investment.

Liquidity should be your guiding factor when making investment decisions. If you feel that you might need cash fast, avoid investments that cannot easily be turned into money, such as real estate. Instead, go for bonds or stock.

Again, investment management will help you make sound investment decisions after evaluating your needs.

4. Investment Management Helps You Identify Potential Risk

Every investment has risks that must be considered. Nonetheless, some investments have higher risks than others. It is, therefore, best if you work on identifying and evaluating them to make the best choice.

Investment management involves risk management which is a paramount aspect of any investment.

By tracking the risks, probably based on past experiences or what other investors have to say, you can narrow down any aspects that are likely to derail you from reaching the investment goals.

Identifying the risks helps you to come up with effective strategies to avoid them or avoid the investment altogether. You are able to develop ways to work around and minimize the effects of the risks if you cannot avoid them completely.

In return, you are assured of a successful investment venture and high chances of reaching your financial goals. 

5. Hiring an Investment Manager Gives You Access to Professional Analysis

You may have big investment dreams but have no clue as to how the investment world works.

The process can be daunting, especially with the little to no knowledge that you have about investments. This is where professionals come in to handle all your assets and financial investment to ensure that you follow the investment route with the lowest risk.

The experts will develop an effective investment strategy, buy and sell assets on your behalf and handle asset allocation.

Investment managers come in to take the stress off your shoulder by carrying out the complex tasks and leave only the simple decisions for you to make. The idea is also helpful if you have a lot on your plate and feel that you could use a helping hand to avoid making hasty investment decisions.

With professional investment management, you will have peace of mind knowing that experts are tirelessly working towards offering you the best investment options.

They will guide you on the key aspects to consider before making a final investment decision. With this, you can rest assured that all decisions are backed up by years of experience and unmatched skills and knowledge.

You will have minimal chances of making errors and maximum chances of reaching your financial goals.

6. Experts Provide You With a Stronger Investment Foundation

If you are a beginner, the chances are that you will get lost along the way or make aggressive investment decisions.

This is mainly because you are not aware of the numerous investment risks and lack prior experience. You are likely to choose the hit or miss strategy, which comes with more expensive risks.

Letting an investment manager into your plan saves you from such mistakes. You will be at peace knowing that your assets are in the hands of someone who understands what they are doing.

While no one can claim that they are 100% sure of an investment outcome, expert managers make well-calculated guesses based on past experiences and market trends. They will not take random shots, thus increased the chances of a successful investment and high returns.

7. DIY Investment Management Hinders Balance and Diversification

The importance of investment portfolio diversification cannot be overstated.

It would be best if you had several investments to minimize losses. If one investment fails, the other one will come through for you and cover the incurred losses. It protects you because you will be less exposed to price fluctuations and instability in cases of unexpected economic changes. 

However, the little knowledge and experience you have on investments are not enough to guide you through diversification. You must identify your risk tolerance first before determining how you wish to diversify your assets.

Diversification does not mean that you have to buy an array of bonds or stocks from different industries. It means that you should be ready to invest in all asset classes. Invest in stocks, gold, cash, and bonds, to mention a few.

You should evaluate all these classes critically to spot the riskiest of them all. This is something that only experts can do. Otherwise, you will end up making irreversible mistakes.

8. Investment Management Involves Monitoring Your Investments

There is a thin line between being a diligent investor and a novice who only watches the investments like a hawk.

Failure to track or monitor your investments results in confusion. You will not be in a position to identify which assets are worthwhile and when you need to rebalance your portfolio.

Balancing entails moving money in and out of particular investments when need be.

On the other hand, monitoring your investment too regularly will drive you crazy. You start noticing potential risks that you didn’t spot before. You even begin to feel like you made a mistake, which leaves you emotionally drained and unable to make sound decisions.

Therefore, you must keep an eye on your investments without going overboard. Keep up with the market trends you have invested in by reading newsletters or watching financial news. This will help you oversee your portfolio and prepare you to take the next best action if needed.

9. Investment Managers Put You at a Better Position to Outperform the Market

When doing DIY Investment management, you are likely to follow a conservative approach. You may have self doubt, which pushes you to settle for average returns.

On the other hand, being aggressive puts you at risk of losing everything.

Letting a professional investment fund manager handle the complex tasks puts you in a better position to outperform the market. You are assured of yielding higher returns per year.

This is because the professionals have the resources to handle more risks. They have effective tricks up their sleeves to help them beat the market regardless of what is thrown at them.

Some of the tricks include investing in hedge funds, diversifying portfolios, and investing in mutual funds, rather than putting all eggs in one basket. Diversification is essential when it comes to safely managing investments.

10. Investment Management Protects Your Portfolio

Unfortunately, no market can be termed as 100% safe. You should be ready for unforeseen changes, especially with economic instability.

Today, things might seem promising, but everything could change tomorrow due to environmental and political disruptions. The only way to get out unharmed is if you are prepared for the uncertainties.

Some effective tips to shield your portfolio include diversifying to ensure that you are not deeply exposed to the changes. You should also consider maintaining Liquidity regularly and focus on investments that you are comfortable with. It is good to have a mix of cash, income generating assets, investments, and precious metals all while minimizing or eliminating debt. You probably don’t want to invest much or anything in cryptocurrencies unless you already have a very well rounded portfolio, excellent finances, and expert knowledge of the cryptos.

If you are not sure of the way forward, let an investment management company take over. You are guaranteed that they will strive to protect your portfolio from market uncertainties and offer you high returns.

Hire a Reliable Investment Manager for Best Results

Now that you have a clue on what is investment management and its benefits, you should consider hiring an expert manager for the job.

Most investors shy away from this idea because they feel that it is costly, but that is not any further from the truth.

With a reliable manager, you can focus on what you do best with peace of mind knowing that they will handle all the complex tasks.

The right investment manager should be experienced and certified to offer the services. You should also check reviews to establish if they are reputable. Do not forget to check their portfolio, as this will help you determine if they can meet your expectations.

Keep reading our articles for more insightful investment and financial tips. Visit the Finance section of the Everything Entrepreneur Blog to learn more about investment management.