Pros & Cons Of Investing Money Through An Asset Management Company
First of all, what is an asset management company (AMC)?
Simply put, it’s a business that collects investments from different clients and pools them all together. Effectively, they use lots of people’s money to invest in different things, generating a return for all investors.
This sounds like a pretty promising idea, but is this a wise way to invest your money? Are you better off investing on your own? Let’s look at the pros and cons to find out:
Advantages of investing through an AMC
Primarily, these are the advantages of investing through an AMC:
- Experts take care of your money
- You enjoy a diverse portfolio with minimal risks
- You have access to better investment options
AMCs exist all throughout the world, and they can be very beneficial. Companies like Fundamental Global have made a name for themselves by investing people’s money and making them rich. The key benefit is that you put your money in safe hands, giving it to professionals with expert investing experience. This means they know how to invest better than you do, reducing the risks. The risks are further reduced when you consider that your money is pooled with loads of others, allowing the AMC to invest in so many different things, adding diversity.
Of course, the fact there is so much money in your investment pool will also mean you can access investments that you wouldn’t be able to afford alone. These unique offerings could help you make even more money.
Disadvantages of investing through an AMC
On the other hand, there are some possible downsides to using an AMC:
- Your investments might underachieve
- There could be conflicts of interest
- You may have to invest more money than you’d like
Sometimes, your investments can underachieve through an AMC because all the returns are distributed amongst the members. You might find that investing your money alone can provide bigger returns – though there is an added risk.
Furthermore, the biggest issue with AMCs is that conflicts of interest could arise. The people in charge of the AMC may want to invest in things that they have a personal interest in. Thus, they grow their wealth, even if you don’t want to invest in certain businesses or assets. You also have the issue of high minimum investment thresholds. To be part of an AMC, you have to contribute a minimum amount. In some cases, this is far too much money that you’re prepared to invest in one go.
All in all, there are definitely some key pros and cons of investing through an asset management company. The conclusion to this is that it can be beneficial for some people, but not so beneficial for others. If you’re just starting out on your investment journey, don’t bother with an AMC. They are likely too expensive for you to join, and you will be better off investing alone and learning more about the world of investments. But, if you reach a point where you have a lot of capital, joining an AMC could help.