What Is Investment Management and Do You Need It?

Businessman analyzing investment charts on document paper and using laptop computer at office.
Natee Meepian / iStock.com

Investment management refers to the professional handling of an investment portfolio. Individuals and institutional investors use investment management to make the most of their money. If you don’t have time to manage your investments or aren’t confident about making investment decisions independently, an investment manager can help.

What Is Investment Management?

Investment management refers to the process of managing financial assets and other investments. It includes coming up with an investment strategy for the buying and selling of portfolio holdings and managing investments to align with clients’ goals and risk tolerance. It can also include budgeting, banking and tax services.

Simply put, investment management is the practice of managing assets within an investment portfolio to achieve a specific goal. The term is also referred to as portfolio management, money management or wealth management.

Investment management services include asset allocation, stock selection, portfolio management and overseeing existing investments. Investment management isn’t just about monitoring clients’ portfolios; it may also include financial planning and advisory services.

What Does an Investment Manager Do?

Investment managers are typically charged with managing the investments of a company or an individual. Managing the assets usually means that the investment manager selects what to invest in and decides when to invest or withdraw money from a certain investment. They often deal with a wide range of securities and financial assets, including stocks, bonds, commodities and real estate.

Building Wealth

The job of an investment manager is to grow wealth for both individuals or companies. An individual may hire the services of an investment manager to manage their financial portfolio; alternatively, many companies hire an in-house team of managers to manage their portfolios based on the company’s goals.

The goal of an investment manager is to make money for their clients. They do this by devising an investment strategy to meet the clients’ goals, then use that strategy to decide the type of investments to add to their portfolio. Generally speaking, the work of an investment manager is to manage clients’ portfolios on their behalf and make profits.

How Investment Management Works

Investment management firms typically manage your portfolio on your behalf. An investment manager will first assess your goals and risk tolerance by asking you a couple of questions. Based on the answers you provide and factors, such as time frame and returns, they’ll then come up with an investing strategy to match your needs.

When To Hire an Investment Manager

If you feel that your portfolio is getting too much for you to manage on your own, it may be time to hire an investment manager. They can help you make more informed investing decisions. Even if you’re feeling good and like things are going well, hiring a professional only makes sense as part of a long-term investment strategy.

Building Wealth

Several other things can tell you it’s time to hire an investment manager. Here are a few examples.

You Don’t Have Time to Monitor Your Investments

One of the main reasons people hire an investment manager is because they don’t have time to monitor their own investments. An investment manager can spend more time watching the markets and reviewing potential opportunities than you could afford to do on your own.

You’re Not Confident About Making Investing Decisions on Your Own

Though countless resources are available on the internet to help you make sound investing decisions, it can still be challenging to know if your current investments will continue to be profitable. An investment manager may also help you avoid making any mistakes in the stock market that could cost you money in the long term.

You Have a Very Large Amount of Money You Need To Invest

Investing all of your money on your own can take a lot more time than you may have during the day. Even if you have a great deal of experience in this area, it may be difficult to monitor your investment portfolio. An investment manager can help ensure that your investments are appropriately allocated so you don’t lose any profit from fees and increase the amount saved for retirement or other long-term plans.

You Want Someone To Help Manage Other Financial Needs

If you need help in managing your other financial needs in addition to portfolio management, you may want to consider hiring an investment manager. Such needs can include financial planning, debt management, retirement planning, insurance and more.

Types of Investment Management Services

Whether you’re looking for investment management services or someone to help you get your finances in order, there’s a service for you. Here are three types of investment management services to consider.

Robo-Advisor

A robo-advisor is an online, automated service that provides the ideal investment mix of securities based on your current financial situation, investment goals and risk tolerance. Robo-advisors are less expensive than traditional investment managers; plus, most have low account minimums, making them suitable for new investors.

Good To Know

Robo-advisors typically charge annual management fees of 0.25% to 0.50% of your assets under management, though some charge a fixed monthly fee instead.

Online Financial Planning Services

Your money management may grow more complex as your net worth increases, which means you may need financial planning. Online financial planning services provide guidance beyond investment management. This can include retirement planning, estate planning, choosing a life insurance policy and more. Such services offer access to a team of both online and human financial advisors.

Traditional Financial Advisors

Traditional financial advisors offer investment management in addition to financial planning. These professionals meet with you face-to-face to discuss your current financial situation and goals, then advise accordingly.

You can hire a traditional financial advisor to come up with a financial plan that meets your goals. The cost of a financial advisor varies, but the charge is typically based on assets under management.

Final Take

Investment management comes with several perks and that’s why it’s a smart choice to work with an investment manager. These professionals can help with just about anything, from finding the best asset allocation that yields a profitable return to building a retirement plan.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Lydia Kibet has been writing professionally since 2017. Her passion for helping brands in all aspects of content marketing flows through in the expert industry coverage she provides — personal finance, investing and healthcare. Her work has been featured in The Motley Fool, Investor Junkie, Green Market Report, and Medical News Today. When she’s not writing, she’s either reading, playing guitar or catching up with nature. Follow her on Twitter.

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