Investing is a complex undertaking, but there are certain methods to maximise your rewards with minimal effort on your part. Discretionary portfolio management (DFM) is a popular tool to help investors achieve this, but what are the benefits of the approach?
Let’s start with a definition of DFM before exploring some of the reasons to give it a try.
What is discretionary portfolio management?
Essentially, DFM is when an investment manager makes decisions for your investment portfolio, rather than yourself. They use their expertise and judgement to make moves as they see fit, without any input from you.
While this might sound a little daunting, giving up control of investing decisions brings with it a range of benefits.
Save time
Investing is incredibly time-consuming and the market regularly experiences periods of intense fluctuations and change. Overseeing your investments can become difficult when doing it yourself, and this can take time away from your day-to-day life or work.
DFM means you don’t have to worry about the complexities of your investments, instead, you’re safe in the knowledge that they’re in safer hands than yours.
Flexibility
Sometimes, an investment opportunity arises with an immediate decision required. If your investment manager sees this and is confident of its success, they can make a decision there and then without seeking clarification from you.
This helps you reap dividends of a nimble, real-time eye on the ever-changing investment market.
An experienced hand
DFM often means efficiency and an understanding of investments that can only come from a seasoned professional.
With your portfolio and the investment market monitored constantly, you’ll find yourself in a position to benefit from potential opportunities only an experienced professional can spot.
Less risk
Risk is always agreed in advance when it comes to discretionary portfolio management, and this is a cornerstone of investing in general.
However, the risks of investments being poor decisions are also reduced when you use an expert in the industry, as they have access to more funds and solutions than you would personally.
The Disadvantages of DFM
Of course, it’s not all plain sailing when you choose a DFM approach for investments.
Certain managers fail to add value to their clients’ portfolio, for example, and it can take a lot of time for you to really know whether or not they’re acting in your best interests.
These transparency issues, combined with the costs of hiring a manager to take care of your investments, mean that discretionary portfolio management isn’t for everyone.
Summary
As is the case with most financial advice, there’s no definitive answer to whether or not DFM is the right strategy for you.
There are plenty of benefits to consider, but ultimately, it’s a matter of trusting your investment manager to the point that you’re happy to let them take the reins of your investments for a long period of time.
For more information regarding investing, intergenerational wealth management, or retirement planning, get in touch.