Asset management involves partnering with a professional advisor to identify, deploy, and manage your assets for long-term growth. By understanding and utilizing this powerful tool, investors can work towards their financial goals by bolstering portfolio strength. In this post, we’ll explore the basics of asset management so that you can make informed decisions about managing your money.
4 Key Parts of Asset Management
Asset management involves making, trading, and managing your investments. The goal is to grow your wealth while managing and mitigating the associated risks. If you plan on working with an asset management professional, here’s what you can expect.
1. Identifying Your Goals
If you’re like most people, you currently have general goals for growing your wealth. Whatever your goals, an asset manager can help you clarify them and make them easier to track and work toward.
Although the concept of goal setting isn’t new, the idea of creating SMART goals—plans which are Specific, Measurable, Achievable, Relevant, and Timely—can be incredibly useful in optimizing how we budget and save for our future.
For instance, suppose you develop the initial goal of ensuring a comfortable retirement. Provided your current financial situation makes that an achievable goal, you and your asset manager can work together to transform that relatively vague ideal into a SMART goal by stating that you should have a set amount of money by a specific date/time.
2. Identifying Your Risk Tolerance
When it comes to investing, having an understanding of your risk tolerance is paramount. Understanding what level of risk you’re willing and able to take on can help inform decisions when considering potential investments.
When creating an investment portfolio, you need to weigh your potential gains against your potential losses. Often, investments with the highest possible returns also carry the most significant risk of losses, while more secure investments tend to have more modest returns. Of course, every individual has a level of risk they’re comfortable with, and your asset manager will discuss your risk tolerance with you to help guide your investment choices.
Asset managers also can offer advice and guidance on what level of risk they think is acceptable given your situation. For example, if you’re relatively young and still new in your career, a slightly higher-risk investment strategy may lead to greater returns over time. In contrast, if you’re nearing retirement age, a high-risk strategy may run the risk of depleting your assets.
3. Making and Managing Investments
Plenty of people believe that asset management and wealth management are the same. However, wealth management focuses on your broader financial situation, while asset management focuses more specifically on your investments. An asset manager will be able to recommend the best way to invest your money across several classes of assets, such as:
- Real estate
- Mutual funds
- Exchange-traded funds (ETFs)
If you have an existing investment portfolio, a professional asset manager can review it and recommend any changes. If you don’t yet have a portfolio, they can help you start investing. They will also keep track of your finances over time and recommend changes to your investment strategy as needed.
4. Conducting Rigorous Research
Asset managers are responsible for overseeing their clients’ investments, aiming to maximize returns while minimizing risk. To do this, they conduct a wide range of research to understand market trends, economic conditions, and the performance of individual assets. This research can vary from conducting surveys to analyzing financial statements and staying updated with the latest news. By leveraging this information, asset managers can make informed decisions about which assets to include in their client’s portfolios and when to buy or sell them. With the right research, an asset manager can help clients work toward their investment goals and stay ahead of the competition.
Discover the Good Life
We hope you enjoyed this guide on the basics of asset management. If you have additional questions, speaking with a qualified financial planning professional is the next logical step.
Whether you’re new to investing or need to update your current strategy, our team at Good Life Financial Advisors of Mt. Pleasant, SC, is here to help. Here, all our client relationships begin with a complimentary discovery call. This meeting is a no-obligation consultation where we discuss your current life circumstances, financial situation, and long-term money goals. It is also an opportunity for you to learn more about us and determine whether you feel comfortable moving forward with our team of financial professionals.
If you’re ready to discover the Good Life, contact us today to schedule your free consultation. Again, thanks for visiting our blog; we hope to help you soon!
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. All Investing includes risks, including fluctuating prices and loss of principal.