Getting huge amounts of money in your investment options will not be of much use if you do not have the right money management skills. As investments involve risks and opportunities, you need to practice sound investment management in order to protect your yields and increase your portfolio’s growth potential. Businesses would be wise to have their own finance or investment department overseeing their investments. This could be an internal team or an external group of consultants. For individuals, this could be a financial adviser or a personal investment manager. Either way, these finance experts can help maximize gains and minimize risks in any investment undertaking.
Investment management involves balancing risks versus potential
yield and aligning these with the investor’s financial goals.
Not every investment that promises the highest yields is the best for every investor. Often, those that offer the highest yields also carry the highest risk. In this case, an investor who does not have much by way of available funds might not be wise to choose this type of an investment. Likewise, an investment instrument that gives the highest yield in 20 years might not augur well with an investor who would want to reap investment gains over the short term. It is the investment manager’s task to reconcile these factors to provide the best possible portfolio setup for the investor.
There are different investment instruments that you can include in your portfolio. It is always recommended to have a mix of products that offer you a range of yield potential. This allows you to manage your risks so that any loss in one particular instrument can be countered by another instrument in your portfolio. It is important for you to understand such risks right at the onset so that you can plan your asset allocation properly. It is also recommended to have a portfolio review periodically. This will allow the investor and his investment manager to make the necessary adjustments to take advantage of new opportunities or to address upcoming risks.
While it is understandable that you will have to pay your investment manager, your relationship with him should be that of a partnership. You have to find someone who can be trusted to look out for your interest as he takes care of your investment management needs. But, even if you find a competent professional to handle your investments for you, do not take a step back and leave everything to him. You still have to be in control of your portfolio. You should still be the one to make the investment decisions based on your advisor’s recommendations. This is the only way through which you can maximize your investment growth potential.
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