Definition Of Money Management
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Definition Of Money Management

The process of budgeting, saving, investing, spending or otherwise in overseeing the cash usage of an individual or group. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans.

BREAKING DOWN 'Money Management'

While the term is usually used in reference to professional money managers such as KARAMWAY, everyone practices some form of investment management with their personal finances. There are a wide range of money management services, from the operation of passively-managed mutual funds with low fees to in-depth estate planning and consulting. Investing successfully is key to reaching your long-term goals. Your ability to invest successfully, however, is based upon a combination of your knowledge, the tools available to you, your time, your motivation and importantly, the quality of the advice that you receive.

1. Doing it all on your own:

You conduct the analysis, make decisions as to the correct asset allocation, determine which investments to buy, implement the buys and sells, monitor the portfolio and re-balance the portfolio based on a prudent repeatable process that is tax efficient.

2. Seek counsel from an Advisor that provides you with recommendations; either paid on an hourly basis or as part of a financial plan (and who does not sell a product). The Advisor provides advice as to allocation and specific investments, but you implement the recommended changes to the allocation and specific investments. It is up to you to return for future advice. The Advisor does not monitor or proactively call you when a change occurs. The advice does not include the payment of commissions.

3. Advisor and you “co-manage” your investments on an ongoing basis. The Advisor does the analysis, provides recommendations, and does the investment implementation except in the case(s) of employer retirement accounts wherein you implement specific changes. The Advisor monitors the investments and your asset allocation, reports to you periodically as to the performance of your portfolio, pro- actively contacts you if a problem arises, discusses suggested tax efficient re-balances as needed, updates your Investment Policy Statement and changes your asset allocation as your plan changes. The advice does not include the payment of commissions.

4. You turn your investment decisions over to a money manager. The Manager invests the money according to a pre-determined plan, monitors the portfolio and investments and makes changes as needed. You are an observer to the process and the results.


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