Definition§
Discretionary Investment Management refers to a type of investment management service in which a portfolio manager has the authority to make investment decisions without the prior approval of the client. This is akin to giving someone the keys to your mansion and telling them to decorate it just how they please—just hope they’re not into neon flamingos and clown paintings!
Discretionary Investment Management vs Non-Discretionary Investment Management§
| Feature | Discretionary Investment Management | Non-Discretionary Investment Management |
|---|---|---|
| Decision-Making Authority | Portfolio manager (high discretion) | Client (limited discretion) |
| Client Involvement | Minimal involvement | Significant involvement |
| Speed of Investment Decisions | Faster trades | Slower trades due to client approval |
| Trust Requirement | High trust in manager’s expertise | Moderate trust |
| Typical Clients | High net-worth individuals | Average investors |
Related Terms§
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Portfolio Manager: A professional responsible for making investment decisions and managing a portfolio of assets on behalf of clients. (Kind of like a coach, but instead of cheering from the sidelines, they’re calling the shots!)
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Chartered Financial Analyst (CFA): A professional designation awarded to financial analysts for their mastery of investment analysis and portfolio management. (They deserve a cape!)
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Financial Risk Manager (FRM): A professional designation for those who manage risk in investment portfolios. (They’re like the insurance agents of the financial world!)
Formula for Assessing Performance§
To assess the performance of a discretionary investment portfolio, the following formula can be used:
Portfolio Return = (Ending Value - Starting Value) / Starting Value * 100
Humorous Insight§
“It’s better to invest in your own portfolio manager than your brother-in-law’s bakery—unless he offers free donuts!” 🍩
Fun Facts§
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The first investment fund was set up in 1774 by a Scottish merchant named Abraham van Ketwich. He probably never imagined there would be beach-themed investment firms today!
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Discretionary investment management can lead to higher returns if the portfolio manager is exceedingly skilled, but “if” is the operative word here—there’s a reason they don’t call them “portfolio magicians!” 🪄
FAQs§
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What qualifications should I look for in a discretionary investment manager?
- Look for advanced degrees and professional designations such as CFA, CAIA, or FRM. If they have a PhD in “making money,” even better!
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Is discretionary investment management suitable for everyone?
- Not really! It’s most suitable for those with a good amount of wealth and a preference for not being involved in day-to-day decisions—kind of like how you “manage” your house plants!
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Can I withdraw funds anytime?
- Yes, but check with your manager; Halloween costume emergencies shouldn’t affect your long-term portfolio strategy.
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Are there fees associated with discretionary investment management?
- Absolutely! It’s like paying your dentist for a clean bill of health—it can be worth it, but still comes with a price tag!
Suggested Readings§
- “The Intelligent Investor” by Benjamin Graham
- “A Random Walk Down Wall Street” by Burton Malkiel
Online Resources§
Test Your Knowledge: Discretionary Investment Management Challenge§
Thank you for joining us on this delightful tour through discretionary investment management! Keep your investments steer with a smile and remember, “An investment in knowledge always pays the best interest”—and sometimes, the best punchlines! 💰😄
