The degree to which how quickly and easily an asset can be turned into cash. An investor has to consider liquidity depending on the time horizon of your investment.
Investment strategy that arranges many assets at varying weights. This strategy can be used to change the desired goals, risk tolerance, and potential return of a portfolio.
The degree to which the price of an asset fluctuates. Essentially, the more volatile an asset is, the riskier the investment.
An investment that reduces the risk of negative price movements in an asset. Wealth Managers will hedge investments against each other to increase the risk-reward profile of a portfolio.
An investment strategy in which money is allocated in a portfolio across a variety of different investment solutions. This minimises the risk that one or two investments will cause the whole portfolio to lose money. Diversification strategies have low risk but also lower returns.
An investment strategy in which a portfolio is allocated into similar asset classes. Because the price movements of these assets are very similar and correlated with each other, a concentrated portfolio has a higher risk but also potentially a higher reward than a diversified portfolio.
Yes. Wealth managers can provide assurance that you will make the correct financial decisions to achieve your future needs and desires. Obviously wealth managers do charge for their professional financial advice, but a wealth management firm that recognises your tolerance for risk and return and financial plan will help you remain comfortable with your financial state.
This is not recommended, as wealth managers have expertise in their field that allows them to achieve the highest capital gains possible. Wealth managers have expertise in tax optimisation, and understanding the tax laws on different types of investments can be complex and cost you money if not understood properly. Some wealth managers also have other resources, such as access to more private investment vehicles that can help expand a client’s investment opportunities.
Wealth managers can accommodate a wide range of clients. Some wealth management firms such as larger banks have a minimum required investment amount, but any individual can find a wealth management firm that is right for them, regardless of the size of the investment.
No. Some wealth management firms offer many financial services beyond financial planning and investment. Also, some wealth management firms simply advise and do not actually invest an individual’s money, while other firms have complete control over one’s money.
A good wealth management firm will accommodate changes in your lifestyle. If you have a change in your needs or desires, you should talk to your wealth manager about it. He or she should be able to adapt your plan and portfolio to major changes. Do not waste his or her time explaining every minor change that happens, but if your financial state or outlook changes, let your wealth management firm know.
The normal fee for wealth managers is usually a small percentage of around 1-1.5% of assets under management per year. As a client puts in more money, the percentage that wealth managers take declines. If you have a good wealth manager, then this small fee will be greatly outweighed by the return that these wealth managers get on your portfolio. It is important to understand the fees and expected return before entering into an agreement with a wealth manager; however, most are very transparent about the costs and return.