The last few years have been turbulent, full of change and uncertainty. The state of the world has caused many of us to make shifts in our lives, both personally and professionally. Some of these shifts may be short-lived, and some may last much longer, for better or for worse. And in thinking of our finances, worry might come to mind as more uncertainty about the global situation seems to loom around the corner. This is why investment management in 2022 is as important as ever, for investors at any stage of their journey.
The COVID-19 pandemic has had a profound effect on the world economy, so it should come as no surprise that the investment management industry is having to continually recalibrate.
But the question is, what does all of this mean for your investment portfolio?
Investment Management: Taking Control of Your Wealth
Many of you are undoubtedly familiar with the term investment management already. Investment management is, of course, the process of overseeing and managing an individual’s wealth.
That’s a surface-level explanation, but in reality, it is more complicated than that. Investment management generally refers to a service provided by a professional, oftentimes from an investment management firm. Occasionally, financially savvy high net worth individuals will manage their own investment portfolios, although it is more commonplace to hire an investment manager.
Investment management is very personalized; investment managers do not simply try to make their clients as much money as possible (although that certainly is part of it). They also make sure to allocate assets by managing their client’s portfolio in ways that cater to the client. Especially their specific risk tolerance, financial goals and priorities, and other individualized investment desires.
Asset Allocation Models for Investment Management Success
This brings us to asset allocation, an extremely important component of investment management.
Asset allocation is the process by which investments in a given portfolio are distributed. How exactly an individual’s investments are distributed amongst different asset classes (stocks, bonds, and cash being the primary three) is dependent upon their personal risk tolerance and financial goals.
Without asset allocation, successfully managing an investment portfolio is rather impossible.
Investment Management in 2022
One concrete shift that investment management firms have faced in the past two years is the need to digitize everything. A lot of investment management services of late have been taking place, for the most part, virtually. Therefore, if you haven’t already, be on the lookout for investment advisory services and platforms that are highly effective in an online format. This will allow for longevity in your professional relationship. And it might even be more convenient than constantly trying to set up in-person communication.
Alternative Investments to Boost Your Investment Strategy
Another trend we are seeing is an increased eye towards alternative investments. Alternative investments refer to investments that are outside the “big three:” stocks, bonds, and cash.
This can mean anything from real estate to precious gems to rare coin collections. There are a few particularly appealing elements of alternative investments. For one, they are somewhat impervious to the fluctuations of the stock market. They also potentially give the investor the opportunity to capitalize on something they are an expert in.
Pursuing alternative investments as a part of your asset allocation model can be an attractive and even fun way to protect your wealth even further from the ebbs and flows of the marketplace.
Factors Affecting Investment Management in 2022
One especially pressing issue emerging more and more as a factor in the investment management field is climate change. Even though we have been continually inundated with news about the coronavirus, in many ways 2020 and 2021 have also shed light on humanity’s impact on the environment.
The environmental changes we saw and felt when people stopped driving, flying, and participating in other polluting activities were astounding. Even as the country has tried to resume a “normal” amount of movement and activity, it’s worth noting that climate expertise has emerged as a marketable skill for asset managers.
If you are considering two different financial advisors and one has experience incorporating climate science into their investment strategies, they have kept up with the realities that have come along with the pandemic. Climate considerations will continue to become a part of our lives, creating enormous shifts in social, cultural, and economic values. It’s not too late to dive into this shift from an investment perspective.
Another issue that is increasingly becoming a focus for the investment management industry is planning for retirement.
We know that sound investment decisions and portfolio management are the best ways to guarantee the retirement plan that you want, at least in the United States. Of course, the ways in which you allocate your retirement funds will vary greatly based on
- the time frame of your planned retirement
- your personal values
- risk tolerance
And the main asset allocation models are based on this.
If you are planning to retire in the short term (~ten years or fewer), it is generally recommended to implement a more conservative asset allocation strategy. This means it will be a fairly low-risk, low-reward investment scenario.
If you have a little more time on your hands, say you plan on retiring in the next 20 or so years, you have more wiggle room with your investments. You can take on a more moderate investment strategy. This is typically characterized as having some, but not a significant amount of, risk.
And if you have more than 20 years until your desired retirement date, you have the flexibility to take on a fair amount of risk in your asset allocation model. You have time on your hands to weather market fluctuations.
The Time is Now
Are you a high net worth individual with a good investment manager (or a capable, financial-oriented person who manages their own investments)? Are you someone who has decided to newly commit to investing and investment management in 2022? No matter who you are, the bottom line is to remain calm.
Although the past couple of years have been full of changes, they have also created significant opportunities to capitalize from an investment standpoint. As long as you continue to use an asset allocation that works for you and supports a diversified portfolio, 2022 might be the year to take on some risk if it makes sense for your time frame.
Saddock Wealth Is Here To Help!
There are few things that affect as many areas of your life as your wealth. Thinking about retirement or just financial planning? What about using your wealth to provide for legacy or charitable purposes? No matter your goals, proper wealth management is what will make it happen.
At Saddock Wealth, our years of wealth management experience can help guide you toward financial prosperity.
Schedule a meeting here and we can discuss your best options.