Investment Management


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Investment Management

Investment management is the process of buying and selling securities or other assets based on the investor's long and short term goals, and well as their available capital. With proper investment management, the investor will gain the best return on their investment in accordance with the risk ideally suited to their personal situation.

There are many factors involved in investment management. The investor's age is a large factor, as it determines the amount time available until the investor will need to begin converting assets to cash to pay for retirement.

For example, an individual in their 20s may have 40 years until retirement, and can therefore invest a larger percentage in assets with potentially higher returns but greater risk. An individual nearing retirement, on the other hand, often cannot afford such high risk, as cash will be needed within a shorter period of time.

A common investment management approach is to gradually shift toward a more conservative distribution as the investor gets older. For example, a recent college graduate may invest primarily in stocks, with an equal percentage in riskier futures, options, and currencies. As the individual gets older, a larger percentage of bonds are purchased over time until the portfolio is almost entirely bonds, CDs and other low-risk securities by the age of retirement.

There are many types of investments used in investment management. While stocks and mutual funds may be the most popular, other instruments include bonds, treasury bills, and Certificates of Deposit (CDs). Some of the more risky investments include futures, options, and foreign exchange (forex). While these instruments can produce strong returns, they can also produce significant losses due to loans (margin) that brokerage firms usually offer when trading these instruments. At the other end of the spectrum, investment management can also include real estate or other solid assets. While real estate is often considered to be a safe investment, it is not without risks, as the current housing crisis has displayed.

Within each investment category, there are often unique tools available to aid in optimizing the highest reward with the lowest risk. For example, those wanting to invest in stocks can make use of a tool such as StrataSearch, which helps traders identify ideal times to buy and sell. By using a proven trading system, and diversifying across a wide variety of stocks, investment management can become highly optimized.

Many individuals choose to have their investment management handled by a paid professional. There are often fees for such a service, and individuals must be careful of professionals that are either crooked or incompetent. Poor investment management can lead to great losses, and even wipe out an investor's portfolio entirely. Many investor's diversify by distributing their assets across a number of unrelated investment management professionals.

Some of the more popular investment management services include Fidelity, Charles Schwab, and Merrill Lynch.