Investment Management: Definition and How It Works

Investment Management: More Than Just Buy and Sell Stocks

      Investment management is a process carried out to build investment portfolios, such as bonds, stocks and other instruments, in accordance with the desired goals.

Investment management is also a financial service that provides consultancy in the form of an investment strategy for someone, such as how to buy and sell investments and manage them properly and correctly.

The following is a complete explanation of investment management that you must know.

Definition of Investment Management

Investment management refers to the handling of financial assets and other investments—not just buying and selling of investment products. Management also designs short and long term strategies for acquiring and disposing of portfolio holdings. (investopedia.com)

Investment management is a professional management that manages investments in the form of securities, such as stocks, bonds, or other assets with the aim of making a profit.

The parties that make investments are called investors, which are classified into two: individual investors and institutional investors, which are usually companies or institutions.

The following are the reasons someone makes an investment:

1. Improving the standard of living from time to time.

2. Getting a better life in the future.

3. Make tax savings.

4. Reducing the impact of inflation so as to avoid the risk of decreasing value of wealth.

Investment has risk and return that have an linear relationship. The bigger the risk, the bigger the return you get and vice versa.

This causes investors to deliberately allocate their funds in several places to prevent too much risk.

Investment management has an investment decision process which consists of five stages:

1. Determine investment goals

2. Determine investment policy

3. Selection of portfolio strategy

4. Asset selection and portfolio formation

5. Portfolio performance measurement and evaluation

How does Investment Management Work?

If you use an investment management service, the provider company will provide an explanation in the form of the steps you have to take.

Investment management requires that you create an investment account in accordance with the company or broker used

The provider company will help you transfer the money to the investment account.

The investment manager will later make decisions according to investment objectives, time, and risk.

The investment manager will discuss the risks that you will face, for example, when the capital market conditions are rising or falling.

When Should You Use Investment Management?

In order for the money you save to be optimal, here are signs that you need investment management to manage your finances.

- You don't feel confident in managing investments and making decisions. These things can lead to losses.

- You want an expert who oversees your portfolio and can secure assets from multiple portfolios.

- You have a financial problem and are confused about allocating it.

The Role of the Investment Manager in Investment Management

Investment managers are generally the parties that play a role in the formation of mutual funds.

Mutual funds include the money market, stocks, and fixed income, which are portfolios formed by investment managers.

This is exactly what investment managers do.

Manage client assets

After receiving investment funds, the investment manager then allocates these funds in accordance with the mutual funds that have been selected.

For example, if you choose to invest in a mixed mutual fund, it means that the investment manager is free to determine the investment allocation with the largest portion of 79%.

Decide which investment instruments to buy

The investment manager will determine which instruments will be purchased. Because there are so many investment products in the capital market.

The investment manager's job is to choose which stocks to buy, according to the profits and track record in the capital market.

You simply monitor it, whether the investment is profitable or not. If the investment manager you choose is smart, your portfolio will still be green, even if the capital market is sluggish.

Deciding when an instrument is sold

The investment manager will also determine when is the right time to buy or sell stocks that are not working optimally.

Reporting the state of customer assets

Not only optimally managing funds, the investment manager also has the task of providing daily reports about where your investments have been placed.

You can monitor reports from investment managers through your chosen investment management application.