Oct 7

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Submitted by: Adrianna Notton

Wealth management entails one planning for the financial choices he or she takes. It majorly involves the financial decisions that an individual makes. This enables one to have a good investment portfolio that guarantees an investor good returns with the least possible risk.

This practice is not only limited to institutional investors. Everyone from government to private investors can practice it. It is relevant to all these groups. There are many wealth management firms. Hedge funds are perhaps the most common examples of such firms. The mushrooming of such firms underscores the importance of this crucial service. These firms have qualified personnel who have the relevant academic qualifications and the technical competence to make the required financial decisions.

There are various considerations when pursuing a given asset management course of action. The key considerations are the time period over which the investor wishes to make the investments and the risk levels involved. There is however a trade off involved. When the risk levels are high, the returns are also expected to be high. Investments with longer time horizons also have higher interest rate. One of the best ways of reducing risks is by diversification. Making investments in assets with a negative correlation balances out losses against profits that could occur in other areas.

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Investors can either risk averse or risk neutral. Risk averse investors consider risk as a key determinant in making their investment decisions. They would keep off risky investments with higher interest rates and be attracted to less risky investments with lower interest rates. Risk neutral investors do not take risk considerations. They are solely moved by the interest rates. They make investments in areas with higher returns no matter the amount of risk involved. In a practical situation purely risk averse and risk neutral investors are nonexistent. Investors usually strive to strike a proper balance between risk and return.

Proper wealth management practices have numerous benefits for an individual investor. They balance risks and returns for investors in an objective manner eventually ensuring every investor gains. This provides an overall boost to the economy with positive results such as job creation and innovative practices to keep the investments running.

Speculative practices by professionals in this field is a potential mine field. These could in the long run result in catastrophic losses. To protect the investments being handled, objectivity should be the guiding principle. This will stop the industry from being like a gambling den.

With all these facts stated greater regulation is necessary in this sector. This is to protect gullible investors from the predatory tendencies of unscrupulous professionals. This can be achieved by legislation and government enforcement of all existing laws. Investors should also be educated on how to best manage their investments and the highest possible educational standards ought to be maintained in this field.

On an overall scale, wealth management services are crucial. They are a key way to ensuring financial success and security. Furthermore, it provides an objective way of arriving at prudent investment decisions.

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