Key Differences Between Asset Management and Investment Management

Asset management and investment
management are often used interchangeably. However, it is important to realise
that both concepts are quite different. Understanding the differences between
the two is crucial for effective selection, allocation of your funds, and
portfolio management.

Once you understand the difference between investments and assets, you can formulate a customised strategy and meet your short-term and long-term financial goals effectively. If you wish to learn more about how to build an effective investment strategy to ensure you reach your financial goals and objectives, consult with a professional financial advisor who can advise you on the same. Before we move forward to know the differences, let’s understand what asset management and investment management is.

What is asset management?

The management of assets, such as real estate, equities, bonds, etc., is referred to as asset management. Asset management helps individuals determine asset value, financial health, the potential for growth, and investment opportunities. Managing financial and retirement goals, controlling risk, making projections, analysing data, portfolio-building, etc., all come under asset management. Asset management primarily focuses on diversification that helps in effective risk mitigation.

What is investment management?

Investment management involves effective
handling of various asset classes ranging right from stocks, mutual funds, and
commodities to bonds, pension funds, insurance, etc. The primary objective of
investment management is to develop an investment strategy that will help yield
profits and lead to wealth generation. Financial statements, portfolio
planning, asset analysis, investment monitoring, etc., all come under the
purview of investment management.

You can manage your investments
personally or hire a professional advisor to help you with the same.

Now that you understand asset and investment management, let us study the differences between the two concepts.

Differences between asset and investment management

Anything of value, such as your home,
vehicle, etc., can be considered an asset, besides real estate, stocks, etc.
Asset management involves effectively allocating and choosing the right asset
per the individual’s needs. On the other hand, an investment is an activity
wherein you invest in different asset classes with an expectation of asset
appreciation and earning profits over time. This is the primary difference between investments
and assets.

When it comes to asset management, asset
managers help their clients find different investment avenues and
opportunities. In contrast, individuals who are into investment management
specialise in asset classes (such as stocks and bonds) and help decide which
asset should be made a part of the portfolio.

Asset management tends to take a
holistic approach to wealth generation, while investment management is a
selective approach. Another difference between investment and asset management
is that the former can be done individually; the latter often requires expert
guidance. 

Some additional differences between asset and investment management are:

Asset management includes the following activities:

• Scanning the market for suitable investment
  opportunities
• Portfolio allocation
• Planning for estates and businesses
• Financial planning and advisory services
• Planning for retirement
• Coming up with projections of returns that an
  investment might yield in future
• Preparing reports that give an overview of all
  the investments

Investment management includes the
following activities:

• Setting investment goals and defining
  objectives for a particular portfolio
• Evaluating and analysing the market and
  external and internal forces that affect the market in the short-and long-term
  period
• Deciding which investments to invest in
• Communicating everything related to investments
  and taking immediate action in case an investment is performing poorly.
• Assessing the economic factors that can affect
  a particular investment
• Helping different clients with corporate
  financing and other financing requirements
• Assisting with complicated financial
  transactions
• Underwriting securities that have been newly
  acquired

Differences between wealth and investment management

Investing in assets is the main emphasis
of investment management; wealth management adopts a more comprehensive
strategy. An advisor or broker specialising in investments could take care of
the former. However, if you engage a wealth manager, they will look beyond your
assets to include taxes, insurance, and the entirety of your estate in the
planning process.

Then, one may argue that wealth
management and asset management are similar concepts, but that’s not true.

The goal of asset management is to
maximise returns, whereas wealth management looks at an individual’s entire
financial situation, which may involve managing their assets, taxes, estate,
cash flow, and more.  Wealth management
includes asset management and adopts a more comprehensive approach to your
financial situation.

To conclude

As an investor, you need to understand
the concepts of asset, wealth, and investment management to gain a firm grasp
over the different strategies. You must prepare for more in-depth discussions
regarding your assets and investments with your financial planner or advisor.
Analyse your risk appetite and investment goals, and then pick the right
investment and asset strategy. Consult your financial advisor before investing.

Use the free advisor match tool to match with an experienced and certified financial advisor who will be able to guide and advise you effectively on how to manage your assets and investments to build a well-diversified investment portfolio. Give us basic details about yourself, and the match service will connect you with 1-3 professional financial fiduciaries that may be suited to help you.