Investment and Investment Management
The term ‘investment’ or ‘investing’ is closely related to concepts in economics, finance, and business management. Investment refers to the active redirection of monetary resources and assets towards profit generation and future benefits, rather than consuming them as they are generated. Investment management is the process of professionally managing the various financial securities and assets belonging to an investor, for the purpose of earning maximum benefits. Over the past few years, the investment management industry has grown considerably, managing trillions of dollars annually across the globe.
Investors could be institutions or privateinvestors. Institutions, which primarily invest in assets, include insurance companies, corporations, pension funds, etc. Private investors are those individuals who have, directly through investment contracts or through collective investment schemes, (like exchange trade funds or mutual funds), made investments for future income. Investment management for private investors and investing institutions is also known as ‘fund management’. Investment management services are often called portfolio management and wealth management services.
Investment management is a booming industry responsible for the handling and generation of large quantities of money. and for vast numbers of monetary transactions across the globe. Investment management services include elements of asset and stock selection, financial analysis and continuous monitoring of investments, and implementation of investment plans. As a part of financial services provided, investment management companies are today employing investment or fund managers and staff in great numbers, and focusing on generating impressive revenues.
Investment management professionals or fund managers could mean either individuals who help direct decisions regarding iInvestment management, or investment management firms providing financial services. Investment managers are responsible for:
- Discerning the best strategy for investments
- Financial analysis and asset and stock selection
- Monitoring investments on an ongoing basis
- Helping investors gain the maximum benefits from investments
- Providing advice to private investors
- Handling investments with the utmost discretion
Fundamentals of Investment Management
Investment involves securing finance to buy assets or financial securities that are potentially high profit earners. Before channelising their finance, investors and investment management advisors assisting investors, need to understand the following points:
Why invest?
An individual can either earn money in exchange for labour, or allow money to make money. There are several reasons why money should be invested:
- Investment is the best security for the future.
- The interest earned by money kept in a bank savings account is not sufficient to beat inflation. A savings account gives approximately 2% interest, while investing in mutual funds can yield over 10%.
- Although there are risks involved, with good investment management, an individual can earn between 10% to 15% annual return on invested money.
Before planning investments, investors must:
- Be sure about the aim of their investments
- Decide about returns and whether they fulfill expectations
- Understand the risk involved and decide if they can bear it
These factors will help fund managers decide the medium of investment and exercise efficient investment management.
A strong strategy for investment
After investors have considered the aim of their investments, they are required to make plans for the redirection of finance to achieve profits and financial stability. Investors must identify the areas where they can safely invest money and gain good returns. Fund managers, financial planners and other qualified investment management professionals, can assist in forming investment strategies.
Investment management requires research
Investment management requires a study of the market in which an investor wants to invest, either by following the financial market news, financial journals, trade news on the Internet, etc. This helps reduce the risk of investments.
Deciding on a suitable investment medium
Investing only in one particular medium increases the amount of risk. It is advisable to invest in diverse mediums (multi-investment). This way, the risk incurred in one medium can be covered through profits from another medium.
Investors have two basic investment choices:
- Stock Market – Investors can buy different types of shares, each unique in the amount of risk involved and growth potential.
- Bond Market – Usually less complicated than the share market, the bond market allows investors to invest in options that minimise risks involved in shares.
Areas of Investment Management
Investment management involves the professional management of shares, bonds and other financial securities and assets, like real estate, to meet investment goals specified and specially designed for the benefit of investors. Investment covers areas of finance and business management.
Investment Management in Business Management
Investments are made in the form of tangible and intangible assets. Investment management involves capital budgeting or investment decision-making with regard to assets investment management.
Investment Management in Finance
Financial investments are made by purchasing financial securities and assets from the financial market. Investors buy properties with high market value like gold, commercial and residential real estate, precious items and so on,. Financial investment management refers to the handling of security investments, stocks and bonds, etc, with the yield of future profits as the goal.