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Investment Management Techniques

Investment Management

You’ve worked hard through your career, setting aside money for savings and investments. Now that you have funds in the bank, the next step is to grow your wealth through investments to prepare for your future. With current low interest rates on savings, cash simply kept in the bank will lose value to inflation. However, with proper investment management and compounding interest, you’ll be able to grow your money into a sizeable nest egg. There are many different ways to invest and you’ll want to choose which strategy to engage in based on your own needs.

Whether you want to invest for the short or long-term, there are a variety of different avenues for investing. Different asset classes will provide you with different returns based on their inherent risks. Some of the more well-known investments include:

  • Stocks
  • Bonds
  • Mutual Funds
  • ETFs
  • Real Estate

Whichever option you would like to pursue, there is an investment management strategy that will be right for you. Many people are too busy with work and family to actively pick individual investments, but there are fast and easy ways to manage your money.  Most notably active or passive investment strategy.

Active Investment Management

Fortunately for the busy, there are professionals who will gladly take on the time-consuming process of picking investments for you. You provide the fund manager with your money and the manager adds it to a larger fund with the objective of producing higher than average returns. The benefit to active management is that the fund manager will be able to make real-time decisions based on market conditions to produce higher returns. If the manager believes that technology stocks are set to rise in value, he can add more of them to the fund’s portfolio in order to capture those gains. The costs associated with an active fund are usually high due to transaction costs and the fact that the manager must get paid as well.

Passive Investment Management

Another option for growing your money is to invest passively through an Index (you cannot directly invest into the Index) like the S&P 500 or the Aggregate Bond Index and is meant to mirror a particular segment of the market.  Index investing tend to have fewer transactions than an actively managed fund and have a predetermined allocation stocks, bonds or other investment Indexes. There are very few transactions and no manager to pay so your money has the potential to grow without being impacted with unnecessary fees. The potential downside is that this strategy is meant to provide returns that are in line with the overall market —which means that higher than average returns are not likely.

Factoring in Risk

When choosing your own investment management strategy, it is important to factor in your own appetite for risk. Every investment vehicle will come with some risk and returns are never guaranteed. Whether you choose active or passive investment management, you should make sure your portfolio contains an appropriate amount of diversification to shield you from losses and protect gains.

MultiGen Wealth Services provides professional services for investment management.  To find out more just send us a message.