Asset Management is the process of managing investments to increase wealth over time by buying, selling, and managing investments while minimizing the amount of risk your capital is exposed to. This can be done by formulating a portfolio that aligns with your risk profile, time horizon, and goals.
Not every asset/security will apply to every situation, which is why it is necessary to build a risk profile for each portfolio. For example, two clients may come in and look to start a retirement account that will be accessed at 65 years old. One client is 25 years old while the other one is 64 years old. The type of assets that should be included in each portfolio will vary greatly due to the disparity in time horizons. Even if both clients have similar risk profiles, the large gap between time horizons will allow the younger client to take on more risk.
There is also the factor of risk profiles. A risk profile essentially details how much risk would the client be willing to take. One client may be willing to take on riskier assets such as options, inverse ETFs, and direct participation programs (DPPs). However, another client may only be willing to take on safer risks such as T-bills, Certificates of Deposit, and government bonds.
Despite this, it must be stated that no matter how safe the investment is, there is always the potential for loss of capital. There is no investment that is completely void of risk and all clients should be aware of this fact. It should also be stated that any expected return is only based on historical returns. There is no guarantee that the asset will give a return close to its historical average.
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