Investment Management
What Is Investment Management?
Investment management involves carefully researching, selecting, and actively monitoring a diverse range of investment options, tailoring them into a portfolio that matches your unique goals, risk tolerance, and timeline to grow and preserve wealth.
What Are Potential Value Adds of Working with a Professional Advisor?
- Asset Allocation
Asset allocation refers to the percentage of a portfolio invested in various asset classes such as stocks, bonds, and cash investments, according to the investor’s financial situation, risk tolerance, and time horizon. It is the most important determinant of the return variability and long-term performance of a broadly diversified portfolio.
- Cost-effective Implementation
While it is not always about the lowest cost option, cost plays a role in the investment selection process. It’s not what you make, it’s what you keep.
- Rebalancing
Given the importance of implementing an appropriate asset allocation, it is also important to maintain that allocation. Investments produce different returns over time and portfolios can drift from their target allocation acquiring a different return/risk profile than desired. A benefit of rebalancing is controlling the risk of the portfolio becoming overweighed in either equities or fixed income.
- Behavioral Coaching
Investing evokes emotion, advisors play a pivotal role in helping their client maintain a long-term perspective and a disciplined approach. Most investors are aware of the time-tested principles of staying invested through different market cycles, the hard part is sticking to term in the best or worst of times. This can be the largest potential value-add an advisor can have for their clients
- Asset Location
The allocation of assets between taxable and tax-advantaged account can add value each year. From a tax perspective, optimal portfolio construction minimizes the impact of taxes by holding tax-efficient investment in taxable account and taxable bonds or ordinary income tax investments in tax-advantaged accounts.
- Withdrawal Order for Client Spending from Portfolios
How to spend from portfolios can be a complicated decision especially when clients hold multiple account types, including taxable, tax-deferred (IRA, 401(k), etc.) and tax free (Roth 401(k) or IRA). Implementing an informed withdrawal order strategy can minimize the total taxes investors will pay over the course of their retirement thereby increasing their wealth and the longevity of their portfolios.