4 Reasons Managed Money Works

Managed money is an investment style that involves leaving your decisions up to a manager instead of individually making investment choices. A good example of managed money is a mutual fund, money market fund or even a hedge fund. When you invest in these institutions, you do not personally pick the securities you will have a share in from that point forward. You allow another party, an experienced investment adviser, to manage the funds for you.

#1 Calm in Turbulent Times

A key reason to seek the advice of a money manager is to have advice for the bad times. Most investors can make decisions that will provide moderate or even high earnings when a market is barreling . When a market crashes, though, there is evidence that money managers make better decisions in the face of this adversity. Individual investors are more likely to panic. Managers, especially those who have been in the business for a long time, have seen many crashes come and go, and they are typically poised to turn the fund around once the market recovers. 

#2 Experience and Training

Money managers have been trained to do their jobs. First, they likely attended at least an undergraduate college to obtain a degree in finance or a related field. Many money managers also received higher degrees, such as MBAs or PhDs in their respective fields. Beyond this education, managers train to be certified to handle your money. The Securities and Exchange Commission has explicit licensing policies, and the exams managers take are some of the hardest in any profession. Once a manager has finished his or her training, the manager does not step right into a senior role. Instead, these individuals serve underneath more experienced mentors who have been in the business for some time. Only after all of this training and experience is complete does a money manager actually take the role of fund manager.

#3 Institutional Management

As an individual investor, the capitalization amount you can enter the market with will be limited. Many of the more sophisticated investment opportunities, and those which may be more profitable, are left to large capitalization investors. When you join a fund, your money can be invested at the institutional level. This means your fund manager will be exempt from some of the regulations that would be applied to an adviser working with a single investor. 

#4 Diversification

Every novice investor steps into the market knowing "diversification" is key. This advice persists throughout an investment career. You can attempt to diversify your own portfolio, researching a number of different opportunities, always looking for new ways to spread your risk. You can allocate funds to 20 different types of investments. In the end, though, this is much harder than simply investing in one mutual fund. The fund's manager will diversify the holdings for you, and you will end up with a stake in multiple different types of investments. Diversification happens without your having to think about it. You buy one type of share, and you end up with a diversified portfolio. 

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