Compiled by Arnav Shah
The phrase ‘Investment Management’ usually embarks thoughts of large funds, complications and serious strategies. It is basically managing money in a way that it grows.
What is Investment Management?
Investment management is the process of handling financial assets and investments. It includes buying, selling and managing different types of investments using suitable strategies.
Why is it important to manage investments?
Money eventually loses its value due to inflation. For example, a 100 rupee bill five years from now would not be able to buy what it can today. This means, money that isn’t put to work would decrease in utility. Investments enable you to grow money and deal with inflation.
How to manage your investments?
It is very important to be able to manage your investments in order to reap the fruits. There are certain points you can take into account to manage your investment portfolio
- Prepare strategies based on your goals –
The most important point is to first understand your goals and then prepare investment strategies that cater to the same. Ask yourself questions like :
- What is the reason I am investing?
- When would I need the money back?
Answering these questions would give you clarity and help you to set investment strategies.
- Allocate your investments –
You need to categorize your investments for example : stocks or bonds. Allocating investments would help you prepare strategies. Allocation needs to be done keeping in mind factors like time period, risk and returns.
- Reasses your portfolio if needed –
Your portfolio needs to be balanced in order to make it less risky. With changing market conditions, you should rebalance your investments to divide risk and make it more goal oriented. For example: shifting funds from equity funds to bonds.
- Diversify your investments –
It is always very risky to have all your eggs in one basket. You must diversify your investments to divide risk to deal with market fluctuations and achieve goals.
Breaking the myths about investing
There are a few things about investing that people quite get wrong sometimes. It is important to have clarity and break some of the myths about investing :
- It involves a lot of risk –
Investing is surely a fair bit of a risky task, but labeling it as being too risky is where risk management come into the picture. If you’re worried about losing the money you invest, you should categorize investments on a scale of risk and invest in the ones that come with a low risk.
- When you invest, your money is blocked –
Investing should ideally be done with a long-term goal and commitment but there’s absolutely nothing wrong with pulling your money out if you need it. Investments don’t come with a fixed period of time and the money can be withdrawn whenever. However, that doesn’t mean one should rely and it, it is always better to invest long-term.
- You need a lot of money –
It is a myth that only people with a lot of money can invest. Thanks to a variety of opportunities online, investing has now become easy and can be done with a relatively small amount as well.
- It is a quick way to make money –
There might be types of investments that can get you quick money but those come with high risk and usually don’t end well. It is always better to invest with long-term goals in mind