5 Steps of Investment Management Process

Investing your hard-earned money in the right place is something very important. You may earn a lot of money from the current business that you are doing or the salary you might get from an MNC company, but if you don’t act smart while investing your money then you might lose the money. It is very common for people to think that investing money into the market can be profitable and must be easy, but these are the people who learn the lesson in a hard way. Several factors will define if your investments will perform well for you or not. If you have a decent amount of capital and go on making thoughtless and hasty purchases, it is very much possible that you will not make any money out of it and it can affect your financial and mental health.

            Thus to make some smart investments you need to understand some basic things and follow some steps. In this article, we will guide you by discussing the 5-steps of the Investment Management Process. Read through the entire article to get a good understanding of how the investments work.

 5-Step Investment Management Process

Establish Portfolio Objective.

 The investment committee works closely with licenses to determine the appropriate product brief and portfolio guidelines. The investment Team then develops appropriate Risk and Return objectives to ensure licensee requirements are met. These objectives are monitored closely over time to ensure continued compliance with established guidelines.

            You will have to create something called the “risk-return” profile. As you may know that the market can be pretty unpredictable, thus you will have to decide the risk you can afford to take. The key point to remember is – the more risk you are going to take, the more chances of you getting the higher return. You must do one more thing to keep track of how your investments are doing in the market, set the benchmarks to check it out after a while.

Develop strategic and Tactical asset allotment.

The SAA/TAA is anchored to Licensee guidelines and then developed using the Black Litterman Model:

  • 10-year asset Class correlation matrix and equal risk contribution creates the most diversified market portfolio
  • Reverse optimized to calculate implied expected returns
  • Portfolio optimized on pre-defined risk tolerance to calculate SAA/TAA exposures.

After you get a clear understanding of the financial condition you are in and the risk-return is ready, you need to understand how to allocate the assets that you possess. Being an investor who is willing to put in some decent capital in the market, you should try to invest in various classes like stocks, cash, and bonds. Keep in mind that you split some decent amount among the various classes to get keep the risk factor at the minimum.

Manage Research selection and configuration

  • Proprietary quantitative analysis screens the universe.
  • Qualitative analysis drives final manager recommendations.
  • Collective approval of preferred managers.
  • Manager optimization within the SAA/TAA framework.
  • Ratification via majority vote

Portfolio Implementation.

Final due diligence on recommended investments:

  • Recommendations within guidelines
  • New manager due to diligence check
  • Cash flows in line with TAA and guidelines.

Ongoing monitoring and due diligence.

A robust and structured approach to monitoring and due diligence.

  • Manager meeting or ongoing assessment
  • Underlying quantitative and qualitative portfolio analysis
  • Mandate compliance, liquidity, and regulatory compliance

After you implement all the strategies and plans, now the time has come for you to manage and monitor your investments. You must constantly keep a track of how your investments are doing and the performance must be monitored closely at regular time-intervals. Set the benchmarks for quarterly, half-yearly, or annually and check it at the end to see if you are keeping up with the goals you have set.

            With the change in time, the market is going to show some changes for sure. So, be ready with some backup plans to tweak those strategies and investments. If in case you see that you’re not achieving your goals and find that the market is going down in a certain sector in which you have invested money, try to sell them and re-invest the capital in someplace else to get a more profitable return. Adaptability is the key to the right investment, so make sure you are not stuck with the same strategies.

Final words

I have tried my best to make you understand the basics of the investment management process in this article. Follow these basic steps and it is very much possible that you will not make any bad investments with your hard-earned money. But if you still want to get some professional advice than you always contact someone who knows the laws and rules of investments. Contract lawyers are indeed very helpful in this regard. Invest your money in the best way possible and enjoy investing.

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