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Key Differences: Investment Management vs Asset Management

Investors looking to build a healthy savings account must know the difference between investment management and asset management. Though there are some similarities, they are not exactly the same. Understanding the concept of investment management vs. asset management is crucial to making sound investment and portfolio-related decisions.

What’s the Difference b/w Investment Management & Asset Management?

Though investment management and asset management are sometimes used interchangeably, a thin line exists between the two. Consider the following points clarifying the difference between investment management and asset management:

1. Based on Meaning

Investment management is the process of managing clients’ investment portfolios, while asset management is the process of managing and determining the value of clients’ asset portfolios (including stocks, bonds, real estate, and other investments). 

2. Based on Objective

The primary objective of investment management is to generate higher returns through buying and selling securities and other assets. The primary objective of asset management is to protect an individual’s or institution’s wealth and create a balanced portfolio that aims to achieve long-term growth.

3. Based on the Scope of Work

Investment management in India has a narrow scope of focus, whereas asset management has a broader scope of focus and is responsible for managing all clients’ assets.

4. Based on Type of Clients

Investment management mainly focuses on a broader range of clients, including retail investors. Whereas, asset management typically focuses on high-net-worth individuals, foundations, endowments, and other institutions. 

5. Based on the Management

The investment manager is the key player who ensures the management (i.e., buying and selling) of investment instruments and securities, whereas the asset manager is the key player who ensures the management of the different classes of assets.

6. Based on Categories

The difference between investment management and asset management is also based on the types of investments and assets. Some of the different types of investments are equity, bonds, mutual funds, real estate instruments, alternative investment funds, etc. The other categories of assets are tangible, intangible, and financial assets.

7. Based on Decision Making

Decision-making in investment management is more tactical and based on the performance of individual investments, whereas decision-making in asset management is based on overall strategy and long-term objectives.

8. Based on Key Activities

Financial statements, portfolio planning, underwriting securities, asset analysis, investment monitoring, insurance relief, and evaluation of external market and internal forces are some of the key activities that come under investment management’s purview. On the other hand, asset management controls risks, makes projections, builds portfolios and retirement plans, allocates portfolios, provides advisory services, analyses data, and manages financial and retirement goals.

9. Based on the Responsibilities of Managers

The evaluation of risks, compiling investment reports, forecasting profitability, portfolio construction, etc., are some of the key responsibilities of investment managers. Whereas asset portfolio diversification, long-term strategic planning, and developing portfolios are some of the key responsibilities of asset managers.

10.  Based on the Risk Management Approach

The higher-risk management approach and strategies used for investment management mainly focus on maximizing the returns of the client’s investment.

Meanwhile, the risk management approach used for asset management mainly focuses on reducing exposure to any single asset class.

Investment Management vs. Asset Management: Which is Better?

The determination of the best option among investment management and asset management generally is decided based upon several factors as provided below:

· Investment Goals

The determination of the investment goals of both the assets and investment management is mandatory to align with the goals of the chosen strategy.

· Financial Situation

Analyzing the financial situation (liquidity and size) of the business portfolios is crucial to executing and managing the existing investment and asset portfolios with proper financial planning and advisory.

· Risk Tolerance

Lastly, determining the risk tolerance appetite is crucial for choosing the best investment management or asset management. It is preferential to choose investment management if you have a higher risk tolerance appetite, whereas it is preferred to choose asset management if the risk tolerance appetite is limited to a degree.

Conclusion

Initially, investors must understand the connection between investment management and asset management. An in-depth analysis of investment vs. asset management is the ultimate requirement to clarify the concept of assets, wealth, and investment. Lastly, both asset and investment management approaches ensure safe custody, management, and growth of different classes of assets.

Are you interested in investing in different types of instruments? Visit our website www.enterslice.com and contact us today to guide you through the complexities of investment management and assets management. 

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