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Differences Between Portfolio Management and Wealth Management Explained
Investment helps you to grow your fund by earning returns or interest, but it depends entirely on how the instrument of investment performs. Effective portfolio management lets you confirm that you will not incur loss from your investment options.
Nevertheless, alongside portfolio management, you also need to carefully oversee your total wealth, which encompasses assets, including and not limited to your investments.
There are some significant differences between portfolio management and wealth management that you need to know. Before diving directly into the difference, let’s first have a brief general view of portfolio and wealth management.
What Is the Meaning of Wealth Management?
Wealth management is a procedure to make necessary financial decisions about all your assets. In this process, you must make decisions about your investments, taxation, planning for estates, etc.
The main objective of this management process is to grow your money, protect all your wealth and enhance your overall financial security. You may need the assistance of a wealth manager to get the required advice.
Following are different requirements that you must meet for proper wealth management:
- Planning for taxation
- Estate planning
- Planning for the education of your child
- Planning of legacy
- Retirement planning
What Is the Meaning of Portfolio Management?
A portfolio of investment contains the units of company stocks and mutual funds, bonds, securities, policies, etc. Portfolio management means the procedure of allocating your fund to different investment instruments in a way that can help you generate maximum returns within a stipulated time horizon. In this process, you may also need to make necessary changes in the allocated funds, considering factors like risk and return.
For example, if you see an impending bearish market, you can reduce your company shares and invest more in bonds to secure your returns. You can do this portfolio management independently or under the guidance of an expert.
Now, after knowing portfolio management and wealth management, you can understand the primary differences between them. Read on to learn about it in detail.
What Are the Differences Between Portfolio Management And Wealth Management?
Following are all the significant differences between portfolio management and wealth management:
|
Parameter |
Portfolio Management |
Wealth Management |
|
Function |
Portfolio management helps individuals become observant about investment instruments. |
Wealth management lets individuals enhance their financial security by staying aligned with their total assets and obligations. |
|
Service Offerings |
In this process, they need to identify which investments can perform sluggishly or negatively. Then, they can restrict their loss by reducing or completely liquidating the units of those investments. |
In this service, the experts help individuals find the area of action to address financial issues. This ensures that they will not face legal or financial difficulty in future owing to their obligations. |
|
Purpose |
Through portfolio management, individuals manage their bonds, stocks (exchange-traded funds), ETFs, mutual funds, etc. |
Individuals make informed plans about taxation, estate management, accounting, and retirement expenses through wealth management. |
Now that you understand the differences between portfolio management and wealth management, you can grasp the importance of each of them. If you want to obtain higher returns on your investments and grow your money quickly, you should manage your portfolio proficiently.
You can take the assistance of a portfolio manager for this. On the other hand, wealth management will allow you to oversee all your assets and finances properly. So, it is a holistic approach to managing your overall finances.
FAQs about Portfolio Management vs Wealth Management
What are the different types of portfolio management?
Based on its approach, portfolio management can be categorised into four types, as stated below:
- Active Portfolio Management: Individuals actively buy and sell assets according to the market situation.
- Passive Portfolio Management: Individuals allocate money in almost a fixed investment portfolio according to the market situation.
- Discretionary Portfolio Management: Individuals give their money to a portfolio manager who invests on their behalf.
- Non-Discretionary Portfolio Management: Individuals only get advice from portfolio managers and invest accordingly.
How does a wealth manager help their customers in taxation?
Why is the coverage of a life insurance policy essential for wealth management?
What are the basic things that I need to look for while choosing a wealth or portfolio manager?
Other Important Guides About Wealth Management
Important Articles About Wealth Management
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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