Understanding money management so you can be successful
Money Management is a role that is derived from the idea that compensating someone who dedicates their resources ‘full time’ to making decisions that add to the managed money through profitable investments.
The segregation of tasks through roles within modern society provides the benefit of specialization, which in turn leads to roles which contribute to one specific goal.
Money managers manage money by making investments in many different types of investments. These types of investments or investment vehicles differentiate the money managers into ‘types’ of money managers. Some of these investment vehicles are real estate, futures, currency, stocks, hedge funds, and mutual funds.
- Money managers who manage real estate generally organize their real estate investments through a Real Estate Investment Trust, or a REIT.
- These REIT’s can be publicly or privately held, and can be classified as equity, mortgage, or a hybrid of the two.
- The Key performance indicators for Real Estate Investment Trusts are their Net Asset Value, adjusted funds from operations, and cash available for distribution.
Money managers who manage futures are Commodity Trading Advisors, or CTA’s.
- These advisors are responsible for purchasing publicly traded futures products on exchanges based on a proprietary investment strategy.
- These managers generally are organized as technical or fundamental, and these main areas break down into subgroups of applicable investment methods.
Money managers who manage currency or foreign exchange are often referred to as Forex CTA’s.
- Forex falls under a similar branch of investment vehicle as futures, and is overseen by the CFTS and the NFA.
- These managers provide a service to investors through their investment methods which trade in foreign exchange.
- These managers have disclosure documents which outline their investment history and profitability.
Money managers who manage stocks are referred to as Mutual Fund managers.
- Mutual funds managers buy and sell stocks to include in their mutual fund which is evaluated on its performance as a whole.
- Mutual Funds are organized in many different ways; by sector is a common way, as well as by industry.
- Mutual funds in the United States are regulated by the security and exchange commission, and undergo an auditing process.
Money managers who manage hedge funds are referred to as Fund of Hedge Fund managers.
- These managers select Hedge Funds as an ‘asset’ and evaluate the asset with the presupposition of purchasing units to combine to make a total of their Fund of Hedge Funds.
- These managers hold criteria in which they evaluate hedge funds, and make decisions.
Money managers who manage mutual funds are referred to as Fund of Mutual Fund managers.
- Similarly to Fund of Hedge Fund managers, Fund of Mutual fund managers select mutual funds as an ‘asset’ and accumulate holdings in mutual funds which make up for their total product holdings.
For understanding the differences between mutual funds and managed futures, visit this link.
