Sometimes people ask, what is investment management? Investment management is taking the resources you have for long-term investing and deciding how to allocate those investments. When you think about asset allocation within investment management, you could think of the S&P 500 or foreign stocks. There are also riskier asset classes like mid-size companies or even small-size companies. Along with this, you also have different bond options. You look at all the different areas you can invest in and then decide; what’s the highest rate of return I can get for the least amount of risk? Or you can look at the highest rate of return with a given risk.
If you’re retiring, you probably don’t want to be 100% invested in stocks. Your portfolio will probably look more like 60% stocks and 40% bonds. It’s really looking at the optimal rate of return inside a portfolio using the tools before us. Investment management should always come after financial planning. Financial planning should always be the first step. This is because it is really important to start with setting financial goals.