Investment Management: How To Do It
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Hiring someone to manage your investment portfolio may sound like a service only the wealthy need or can afford. But investment management is about making the most of your money. No matter how much you have in your portfolio, it’s important to ensure every dollar is optimized.
Investment management definition
Investment management is the maintenance of an investment portfolio or collection of financial assets. It can include purchasing and selling assets, creating short- or long-term investment strategies, overseeing a portfolio's asset allocation and developing a tax strategy. Investment management can be done independently or with an investment manager's help.
Portfolio management and asset management are other terms that also broadly refer to overseeing a client’s investments. Investment management, however, isn't just about handling specific assets in a portfolio — it includes ensuring the portfolio continues to align with the client's goals, risk tolerance and financial priorities.
» Need some help? Check out our roundup of the best wealth advisors
How do investment management services work?
An investment management firm may require you to set up an investment account with them or at a brokerage they use. If you have existing accounts at other firms — such as IRAs, taxable brokerage accounts or retirement plan assets still in a former employer’s plan — they may help you transfer your money.
Investment decisions are based on a variety of factors, including:
Your savings goals, such as retirement, education or a large purchase.
The time frame for those savings goals.
Your risk tolerance, or your ability to endure swings in investment returns and stock market fluctuations.
Other factors, such as market conditions, historical performance, tax efficiency and investment fees.
Feeling overwhelmed? If thinking about money is stressful, it may help to talk with a financial therapist.
What does an investment manager do?
An investment manager is a person or company that manages an investment portfolio on behalf of a client.
Investment managers come up with an investment strategy to meet a client's goals.
Then they use that strategy to decide how to divide the client's portfolio among different types of investments, such as stocks and bonds.
The manager buys and sells those investments for the client as needed.
The manager then monitors the portfolio's overall performance.
Some investment managers are also financial planners, providing holistic financial advice on topics such as cash-flow management, taxes, insurance and estate planning.
Some investment managers work with high-net-worth clients to address their financial planning and investment management needs, as well as coordinate the services of other professionals, such as lawyers and accountants. This is often referred to as wealth management.
Wealth management offers more areas of expertise, such as estate and tax planning, accounting services and retirement planning in addition to investment management. If you simply need a hand choosing investments for your IRA, investment management could be helpful. Wealth management would probably be overkill.
» Not sure what kind of help you need? Learn more about the different types of financial advisors.
How to manage your own investments
When it comes to managing your investments you can either do it yourself or outsource it (and pay for the service).
Doing it yourself
If you want to manage your own investments, you'll have to decide what type of account you'd like to invest from, what types of investments you'd like to invest in and how much money you'd like to invest.
» Feeling overwhelmed? Learn everything you need to know about how to invest money
Having someone do it for you
If you'd like to outsource your investment management, you also have a few choices. Here are the pros, cons and typical costs associated with several types of investment management services.
Robo-advisors
Robo-advisors use sophisticated computer algorithms to set a mix of stocks, funds, bonds and cash based on the information you provide about your investment goals and risk tolerance. They are typically less expensive than human investment managers, and many have low or no account minimums, making them well-suited for beginner investors. However, you may only get limited access to a human if you have questions or need advice.
Cost: Robo-advisors typically charge 0.25% to 0.50% of the assets the service manages for you, but a few are free.
Financial advisors
Financial advisors provide portfolio management coupled with financial planning services.
Clients meet with a financial planner to discuss their overall financial picture and inventory assets and liabilities. You can hire a financial advisor to craft an overall financial plan or one to achieve specific goals, such as investing for higher education. The firm may outsource some of the tasks (and some even use robo-advisors to manage customer investment accounts).
We recommend a fee-only financial advisor, which means the advisor doesn't earn commissions from the investments you buy. Commissions could introduce a conflict of interest.
Cost: The cost of a financial advisor varies, but most charge an assets under management, or AUM, fee — typically 1%, but they can be much lower, depending on the provider and the service tier you select. Some advisors charge clients by the hour or an annual retainer.
» MORE: Check out our roundup of the best financial advisors
When to hire an investment manager
It’s common to end up with a collection of investment accounts. You may have a few IRAs, a couple of old 401(k)s from former jobs or that brokerage account you opened after you saw a Warren Buffett documentary. Investment management can streamline your financial life by consolidating accounts from different firms under one roof, making it easier to execute a cohesive investment plan.
But even if your investments are held within one account, investment management is helpful if:
You’re not confident about making investing decisions on your own (or want a second opinion).
You want someone else to keep tabs on your portfolio and rebalance assets when the mix drifts from the original formula.
You’re dealing with complex issues, such as an inheritance, retirement-income planning, tax strategies or legacy planning.
You want an advisor to help manage other financial needs, like cash-flow planning, insurance or debt management, in addition to portfolio management.
You've had a major life event (such as getting married or having a child) or a significant change in income.
» Is it time to hire a financial advisor? Our quiz could help you decide.
Why is investment management important?
Investment management can benefit investors now, and those investments can be passed on to future generations, helping you build generational wealth. And the sooner you get started, the better. Cash typically loses value over time because of inflation. So if you don’t invest in a way that helps you grow your money, you can actually lose money in the long run.
» MORE: Estimate how your money could grow with our investment calculator.