Fundamentals of Investment Management

The fundamentals of investment management taken by the investment management companies include the processing of the securities and assets in such way so as to gain the maximum benefit for the client investors.
The client investor in the investment management may either be an insurance company, a corporation or a pension fund or even may be private investor going for collective investment schemes like mutual fund. The investment managers are sitting at the centre of all investment management taking all the decisions on behalf of the client’s investments.

The investment managers generally take the fundamentals of investment management only. The investment advisor makes an assessment on the needs and risk profile of each client.

One of the prime tasks of the investment management firms is to allocate the asset and the exercise of allocating funds among these assets is of high importance, while the classes of the assets being stocks, bonds, commodities and real estate.
The asset allocation carries significant effect on the performance of a fund as the different asset classes show different interaction effects and market dynamics, while some researches even suggest that the asset allocation are having the predictive power in fund’s success.

It is the prime task of the investment manager to allocate the asset in the most feasible way in order to ensure the success of the fund. The diversification is another measure that the investment managers take up seriously after asset allocation.

The managers construct a list of planned holding depending on the theory of portfolio diversification and the list eventually indicates the amount or percentage that the fund should invest in a particular bond or stock.

A number of different styles of fund management are available that an investment management institution can take up while growth, market neutral, value, indexed, small capitalization, etc being the examples. Every style of fund management has its own distinctive adherents and features while in any particular financial environment it shows distinctive risk characteristics. The performance of the fund is the main acid test for fund management firms and managers. In order to make the performance measurement accurate, all the financial institutions measure the performance of each fund and also get it measured by external performance measurement firms. The aggregate industry data showing how the funds performed against some given indices over various time periods is the main index for performance measurement of a fund.

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Last Updated on : 5th July 2013

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