Ultimate Learning Guide to Investment Management
Investment management is referred to as the management and handling of investments and financial assets, their allocation and many other things including the decision to buy and sell. Fund managers who supervise investment management devise strategies in order to acquire or dispose off financial assets. Investment management also includes budgeting, taxation, banking, asset allocation, and corporate finance to name a few.
Basics of investment management
The underlying objective of investment management is to achieve a specific objective. Investment management is also known as wealth management, portfolio management, and money management. Managers aim to meet certain objectives for the clients whose financial assets they’re responsible and make sure they get the best possible return out of them.
Asset allocation, Analysis of financial statements, selection of stocks, analyzing current portfolio selection, portfolio strategy, and its implementation are services that come under the umbrella of investment management. Financial advisory and financial planning are also taken into consideration when dealing with a particular client’s portfolio in order to make sure it matches with other asset’s and the client’s life goals.
Fund managers deal in a variety of financial assets such as bonds, securities, equities, real estate and commodities. In order to meet the client’s requirements, managers might also include gold, silver, and platinum or precious artworks in their client’s portfolio. Fund managers are also responsible for investment decisions regarding estate planning, retirement and asset allocation in a portfolio holding.
In corporations, investment banking can help deal with various types of assets, be it tangible or intangible, their accountability, their utilization and their maintenance.
Investment banking is a growing industry. Approximately 94 trillion dollars of assets are under management up from around 80 trillion dollars last year.
Principles of Investment Management
In order to run an investment management firm, one must oversee a great deal of responsibility. The organization must recruit talent and skilled professionals who are able to deal, settle market and prepare necessary reports for the clients of the firm. Various other responsibilities may include conducting an internal audit, conducting thorough researches on various asset classes, sectors or whole financial markets altogether.
Moreover, asset management companies (AMCs) must also ensure that they remain inside the legal constraints of the state, which means the assistance of a lawyer or a legal firm. AMCs must also recruit technical experts, who oversee marketing, internal controls, cash flows, verification and recording of financial transactions and most importantly valuation of assets and liabilities.
Fund managers are usually paid a management fee as a means of compensation for their work. The fee is usually a percentage of the client’s portfolio. The fee usually ranges from 0.5%-2% on a per annum basis. A good thing for investors is that the more assets they have, they will be able to negotiate a lesser rate. On an average basis, AMCs usually charge 1%.
In the USA, AMCs who have more than 25 million dollars of assets under their management are supposed to be registered with the SEC; the securities and exchange commission. This also includes companies who provide advice to AMCs, who offer mutual funds. This registration with the state authorities means that the firms accept advisory duties to their clients. As an advisor, the firms are responsible to act in the best interest of their clients otherwise they’ll face a charge and be liable in court.
Pros and Cons of Investment Management
Even the asset management industry is an ever-growing one. There are various problems associated with these firms. The top line (revenues) of asset management companies usually rely on market behavior. This indicates that the company’s profit is directly associated with market valuations. A huge dig in the market valuation is most likely to cause a decline in the firm’s profits. This hurts most when the operations are costing you on a steady basis. Moreover, clients are most likely to be agitated and frustrated when markets are not providing decent returns and when the market is bearish. Most funds can’t sustain a client with an average return and the client begins looking for other options to maximize his/her wealth. And the firms charge a hefty fee for their services.
If a firm is managed with due diligence and by personnel of certified professionals, the firm will most likely perform better than its competitors. The firm will make accurate forecasts and will perform even when the market is not performing. Moreover, with good investment decisions, managers might save your portfolio from possible losses too.
The investment management industry is now facing two challenges
1) The induction of Robo-advisors, these are digital platforms which aim to provide algorithm-driven, automated investment strategies and investment decisions.
2) The usage of exchange-traded funds, whose aim is to perform in line with the benchmark index.
Even though the second challenge seems hindering but these passive decisions are made by human fund managers. The first challenge does not take human beings into account, at all, other than the person who developed the program or wrote the algorithm. The result is, both these challenges pose a serious threat to the revenues of investment management firms as these are seen as lower-cost alternatives. Sometimes these lower-cost firms might even outperform human-managed funds due to the solemn fact that they charge less and tend to perform better because of it.
These challenges have pressurized firms to hire intelligent and highly qualified professionals. Investors check the performance of the individual manager and sometimes they even consider the overall performance of the firm. One way to find out if a company is capable of handling your assets or not is to check how much money they lose in bad times, rather than focusing on how much they make when the market is flourishing.
Most finance graduates or professionals are judged based on how successfully they manage investments. Efficiency in investment management sets the firm apart from average performers in the industry. Therefore, if you have a knack of numbers, can handle pressure, have an understanding of financial markets and their trends, investment management can be a pretty rewarding career path for you.
About This Investment Management Guide
This guide offers the most insightful articles, educational videos, expert insights, specialist tips and best free tutorials about investment management from around the internet. The learning guide is split into four levels: introduction, basics, advanced and expert. You can learn at your own pace. Each item shows an estimated reading or watching time, allowing you to easily plan when you want to read or watch each item. Below you’ll find a table of contents that enables you to easily find a specific topic you might be interested in.
What is Investment Management?
Investment management refers to the handling of financial assets and other investments—not only buying and selling them. Management includes devising a short- or long-term strategy for acquiring and disposing of portfolio holdings. It can also include banking, budgeting, and tax services and duties, as well.
What Does an Investment Management Firm do?
Finding the best investments on the market is a full-time job – it’s no surprise people pay investment management firms to do it for them. Here’s a quick look at how those firms operate and the careers available.
Asset Management Companies for Beginners
Asset management companies take investor capital and put it to work in different investments including stocks, bonds, real estate, master limited partnerships, private equity, and more. They handle investments according to an internally-formulated investment mandate, or process. Many asset management companies restrict their services to wealthy individuals, families, and institutions because it can be difficult to offer meaningful and useful services at a price that adequately offsets the cost to service smaller investors.
Introduction to the Financial Markets
In this video we will take a general look at Financial trading. After going through the origins of trading, we will see the difference between several types of financial markets such as the Forex Market, the Equity Market, the Commodities Market and the Derivatives Market.
Types of Financial Markets
There are so many financial markets, every country is home to at least one, though they vary in size. Some are small while some others are internationally known, such as the New York Stock Exchange (NYSE) that trades trillions of dollars on a daily basis. Here are some types of financial markets.
What Does Time Value of Money (TVM) Mean?
The time value of money (TVM) is the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity. This core principle of finance holds that provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value.
Stock Fundamental Analysis
Fundamental analysis is a powerful tool for stock investors. However, it is also easy to try to tackle too much analysis and wind up paralyzed. It is also true that many financial educators and analysts over-complicate fundamental analysis to create a mystique around their proprietary methods to create a “need” for their service. However, I will show you that (With proper diversification) the process of fundamental analysis can be safely streamlined considerably.
Stock Technical Analysis
Technical analysts consider the market to be 80% psychological and 20% logical. Fundamental analysts consider the market to be 20% psychological and 80% logical. Psychological or logical may be open for debate, but there is no questioning the current price of a security. After all, it is available for all to see and nobody doubts its legitimacy.
The Most Common Technical Trading Rules Explained
In the environment of active futures trading, technical analysis is the premier method of study. It is an examination of price action, as influenced by market participants, and traders use it to craft trade-related decisions, rules, strategies, and systems. There are literally hundreds of technical trading rules, each with various applications on the marketplace. Let’s take a look at five of the most common rules.
Investing in ETFs vs Mutual Funds
As you’re looking to invest, you’ll come across two major types of funds: mutual funds and exchange-traded funds. What are they and which is better? ETFs and mutual funds both pool investor money into a collection of securities, allowing investors to diversify without having to purchase and manage individual assets. But exchange-traded funds are the darlings of the investing world right now.
Contango vs. Normal Backwardation: What's the Difference?
The shape of the futures curve is important to commodity hedgers and speculators. Both care about whether commodity futures markets are contango markets or normal backwardation markets. However, these two curves are often confused for one another. Contango and normal backwardation refer to the pattern of prices over time, specifically if the price of the contract is rising or falling.
Why Stock Prices Go Up and Down
Pretty much everybody understands the basic premise of investing — Buy low and sell high. Investors want to buy stocks and sell them for a profit after they move up in price. But why do stock prices move up and down in the first place? In short, stock prices change because of supply and demand.
How to Invest in Stocks
While stocks are great for beginner investors, the “trading” part of this proposition is probably not. Maybe we’ve already gotten this point across, but to reiterate: We highly recommend a buy-and-hold strategy using stock mutual funds.
Follow this step-by-step guide to learn how to invest in the stock market.
ETF Trading Strategies for Any Investor
You may have heard of ETFs and some of you even have them in your portfolios, but not many investors are aware of the diverse ETF trading strategies these assets have to offer. However, after reading the ETF trading strategies listed below, you will be that much more of a savvy trader and have more weapons in your investing arsenal.
How To Diversify Your Investment Portfolio
Diversification offers a good number of benefits to investors who know what they are doing. For starters, it is averse for risk and works for prudent investors. Besides, it protects capital from wild swings of the market, ideal for achieving long-term growth. However, diversification cannot prevent one from losing money in the market. Instead, it only reduces the risk exposure.
Portfolio Management Best Practices To Mitigate Investment Risk
Investing is a great way to earn passive income, especially if you are one of those investors buying stocks online. However, even the best stocks can wind up producing little return on investment if you do not properly balance your portfolio. Portfolio management is a crucial component of finding success in the stock market. Find out the portfolio management best practices you need to avoid risky investments and earn huge ROI below.
How Do I Choose a Stock Broker or Brokerage Account?
The broker and brokerage firm are the two primary relationships you will have when you begin your journey to investing, whether it’s a stockbroker, commodities broker, futures broker, bond broker, or an all-purpose brokerage firm. This broker guide for new investors explains some of the things you need to look for when selecting a brokerage firm, fees to avoid, an explanation of asset management accounts, how to read your brokerage account statements and trade confirmations, and more.
What Are Bonds and How Do They Work?
Financial advisors love bonds because they are conservative, reliable investments that provide stability to any portfolio. A bond is debt instrument that a government or a company issues to raise money.
Psychological Traps Investors Should Avoid
There have been many authors who have written on psychological or behavioral traps that lead people in the wrong direction with their lives in general. Quite frequently, some classic forms of dysfunctional psychology are directly evident in investing behavior.
Active vs Passive Investing
Investors have been debating the merits of “active” versus “passive” investing for a while now. We break down those concepts and explain why both strategies can have a role in your portfolio.
Best Practices for Portfolio Construction
At the core of portfolio construction are the investor’s underlying objectives, risk tolerance and timeframe for investing. Good portfolio construction strategies reflect the investor’s objectives and constraints, whereas bad portfolio construction does not match an investor’s behavioral tendencies.
Evaluating Investment Performance
Choosing investments is just the beginning of your work as an investor. As time goes by, you’ll need to monitor the performance of these investments to see how they are working together in your portfolio to help you progress toward your goals. Generally speaking, progress means that your portfolio value is steadily increasing, even though one or more of your investments may have lost value.
Understanding How Stocks and Bonds Work Together
Wealth building takes time and should be viewed as a long-term investment. When you’re younger, opt for a portfolio with a heavier percentage of stocks to bonds (for example, 80/20 or 90/10). Stocks carry more risk, are more volatile, but you can expect higher returns. Bonds are less risky, provide a fixed-income stream, while preserving capital.
Understanding Stock Splits
A stock split is a process whereby a company increases the number of company stock shares that are available and decreases the price per share by splitting the current shares into multiple pieces rather than by issuing more new stock.
What Is Options Trading?
An option is a contract that allows (but doesn’t require) an investor to buy or sell an underlying instrument like a security, ETF or even index at a predetermined price over a certain period of time. Buying and selling options is done on the options market, which trades contracts based on securities. Buying an option that allows you to buy shares at a later time is called a “call option,” whereas buying an option that allows you to sell shares at a later time is called a “put option.”
Options Trading Risk Management
One of the key elements of becoming a more successful trader is the ability to absolutely master options trading risk management. And, contrary to what you might assume, it comes down to a couple simple things. Namely, determining and sticking to an optimal position sizing range for each trade and never allocating the full value of your account at one time. In simple terms; don’t invest too much money in each trade and always have money left over to keep the lights on.
How to Use Option Collars to Protect Your Stock
Selling covered calls against a long stock or ETF position is a great way to hedge risk and smooth volatility. Selling a covered call on the S&P 500 on a monthly basis has been shown to not only reduce volatility but to increase returns over the long term. However, considering current market conditions many investors are looking for even more downside protection against market downturns.
How to Buy Stocks at Discounts with Put Options
Options are a powerful tool used by both stock investors, stock traders and forex traders. Watch how I use Cash Secured Put Options to buy stocks of great companies at huge discounts or even for free. By selling Cash Secured Put Options, I get paid for waiting for the stock to come to my intended purchase price.
Economic Indicators You Should Know for Investment
Although investors should get to know economic indicators, the reports are admittedly often dry and the data is raw. In other words, information needs to be put into context before it can be helpful in making any decisions regarding investments and asset allocation. But there is valuable information in those raw data releases. The various government and non-profit groups that conduct the surveys and release the reports do a very good job of collating and cohesively presenting what would be logistically impossible for any one investor do to on his or her own. Most indicators provide nationwide coverage and many have detailed industry breakdowns, both of which can be very useful to individual investors.
Long Term vs. Short Term Trading — Avoiding the Pitfalls
There are several ways to classify traders but one of the most significant differences is the one between short term and long term traders. Traders in both camps may use technical and fundamental analysis and stop and limit orders in very similar ways but with some important differences that can lead to disaster if not properly understood.
Further Reading: Best Investment Management Books
Fundamentals of Investment Management. Presenting applied theory alongside real-world examples, this book provides a survey of the important areas of investments: valuation, the marketplace, fixed income instruments and markets, equity instruments and markets, derivative instruments, and a cross-section of special topics, such as international markets and mutual funds.
Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment. An indispensable roadmap for creating a successful investment program from Yale’s chief investment officer, David F. Swensen. In the years since the now-classic Pioneering Portfolio Management was first published, the global investment landscape has changed dramatically — but the results of David Swensen’s investment strategy for the Yale University endowment have remained as impressive as ever.
The Five Rules Successful Stock Investing. This book provides the kind of savvy financial guidance only a company like Morningstar could offer. Based on the philosophy that “investing should be fun, but not a game,” this comprehensive guide will put even the most cautious investors back on the right track by helping them pick the right stocks, find great companies, and understand the driving forces behind different industries–without paying too much for their investments.
How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology. This book will show you how you too can take control over your life and have success in day trading on the stock market. The book uses simple and easy to understand words to explain the strategies and concepts you need to know to launch yourself into day trading on the stock market.
Further Learning: Best Investment Management Courses
Investment Management Course by the University of Geneva. In this course, you will understand how investment strategies are designed to reach financial goals in a global context. You will learn the theory that underlies strong investment decisions, as well as practical, real-world skills that you can apply when discussing investment proposals with your advisor, managing your personal assets or your client’s investment portfolio.
Investment and Portfolio Management. In this four-course specialization, you’ll learn the essential skills of portfolio management and personal investing. You will learn the theory and the real-world skills necessary to design, execute, and evaluate investment proposals that meet financial objectives.
Introduction to Investments. When you complete this course, you will become familiar with the general structure of primary and secondary equity markets from a domestic and international perspective. Beginning with introductory finance notions of risk and return, we examine qualitative concepts such as market efficiency and valuation.
Investment Analysis & Portfolio Management – Core Finance. You’ll master sophisticated investment analysis and portfolio management techniques that are rigorously grounded in academic and practitioner literature. Explore and master powerful relationships between stock prices, returns, and risk. Quantify and measure your investment risk, from scratch.