Do You Need Professional Money Management?

Rob Friedman/ E+/ Getty Images

Many investors don’t have the resources or the time to buy individual securities such as stocks and bonds. In order to profit from investing in individual securities, an investor not only needs resources and time, but a considerable amount of expertise.

What Is Professional Money Management?

In the context of mutual funds. professional money management is the management of assets by a mutual fund manager. The fund manager will research, purchase and sell securities — as outlined in the prospectus — in order to benefit the mutual fund’s shareholders.

Advantage of Professional Money Management #1 — Expertise of the Manager

In theory, and generally in practice, mutual fund managers have expertise beyond that of the general public. Often times, the fund manager has developed advanced skills through specialized education, experience and professional designations — such as the Chartered Financial Analyst designation.

This education and experience can help the fund manager wade through corporate financial statements (income statements, balance sheets, etc.), research reports and other information, and ultimately help them make investment decisions.

Advantage of Professional Money Management #2 — Resources of the Manager

Many mutual funds have a team of analysts that support the fund manager (or team of fund managers) and help analyze the individual securities. This team of professional money managers generally has a wealth of resources in order to help them analyze securities for potential inclusion in their mutual fund.

The fund manager and analysts have access to research reports, company executives, competitor information, and other important data that is necessary to make wise investments within their mutual fund.

Advantage of Professional Money Management #3 — Saves Time for the Mutual Fund Investor

Most investors have careers, families, hobbies, and/or other interests that consume their time. In contrast, mutual fund managers and analysts wake up each morning dedicating their professional lives to researching and analyzing current and potential holdings for their mutual fund. If you prefer to enjoy your time rather than pour over financial data, then use professional money management.

The Costs of Professional Money Management

Professional money management does not come without costs. Some funds charge a load. while other funds are no-load. Some funds have 12b-1 fees and others do not. Before investing in a mutual fund, it is important to understand the various fees that are charged.

Professional Money Management — Worth It?

Whether or not professional money management is worth the costs you pay is an individual decision. If you prefer to focus your energy on other parts of your life, then professional money management may be for you. If you don’t have the expertise to buy individual securities and believe in the advantages of mutual funds. then professional money management via a mutual fund may be for you.