Four Types Of Investment Management Strategies Your Financial Planner Can Help You With In Australia
Investment management involves more than just buying and selling stocks and shares. It's about making sure that you're doing the right thing with your money, whether it's in the short term or the long term.
A good financial planner will help you make informed decisions about how to invest your money. And they'll do so by using one of four main strategies.
1. Passive Management
Passive investment management strategies refer to those that don't require any active participation from the investor. These types of investment management methods include index funds and exchange-traded funds (ETFs). The main idea behind passive investment management is that it's less risky because it only requires you to buy into a fund based on an index or market value and then sit back and relax while the markets do their thing. Your financial planner can help you decide which passive investment strategy is right for you, based on your current financial situation and any goals that you may have.
2. Active Management
Active investment management strategies refer to those that require active participation from an investor or financial planner. These types of strategies include buying stocks individually or setting up a portfolio for yourself based on your goals and risk tolerance levels. A financial planner is key for this type of strategy because it requires a lot of research and knowledge about the market.
Diversification is the act of spreading your investment portfolio across several different assets in order to decrease overall risk. Diversifying investments helps protect you against major losses in any one class or sector of the economy, while at the same time providing you with a more consistent return. You can diversify your portfolio by spreading your investments across different types of assets, including stocks, bonds, mutual funds and real estate. Your financial planner can help you to diversify your portfolio and ensure that it is properly allocated.
4. Dollar Cost Averaging (DCA)
Dollar cost averaging refers to investing fixed amounts of money at regular intervals over time — usually monthly or quarterly — into an investment portfolio based on its current value rather than trying to time the market by investing when prices are high or low relative to historical averages (which may not work out well long term). This investment management method allows investors to spread their risk over time, which can help to reduce the impact of volatile market fluctuations on the overall portfolio.
To learn more about which investment management strategy is right for you, consult a financial advisor today.