How investment management works the investment management industry acts as an intermediary between those people that have money and want to earn a return on that money who could be referred to as investors and who could include corporations institutions governments or individuals with those people who wish to raise money by issuing financial securities.

Such as governments or corporations.

These financial securities include Equity or shares and debt also referred to as bonds or fixed income securities.

The investment manager acts as an intermediary by taking the Investor's money and investing it into financial securities which trade in the capital markets on their investors behalf.

Investors could invest their money for themselves, but there are many differences between constructing a portfolio yourself also referred to as an individually managed portfolio and investing through the investment management industry firstly with an individually managed portfolio. The investor purchases Investments such as shares bonds real estate or Commodities directly the benefits this provides to the investor that they are able to invest in the Securities, which they have a particularly strong view about providing them with the ability to express their own personal views. The investor also has full control over their tax liabilities through holding Securities that deliver returns which are most tax efficient potentially having a preference for capital gains or income gains depending on the individuals tax situation. It is also possible for the individual investor to sell losing stocks before the end of a tax period to offset against other taxable games to reduce. That overall tax liability known as harvesting tax losses.

However, managing an individual portfolio often comes with higher relative transaction costs due to the smaller transaction sizes and also comes with higher oversight requirements. Meaning the investor has to frequently monitor their own portfolio so they can quickly react to changing market conditions.

This is not the case when investing through a portfolio manager. The portfolio managers job is to look after the investments in the portfolio and ensure that any necessary action is taken promptly. If there are any changing market conditions meaning the investor needs to have less oversight of their Investments on a daily basis.

Portfolio managers are professionals who have demonstrated excellent analysis skills to have been promoted to the role of portfolio manager and may have insights and understanding that an individual investor may not professionally manage portfolios. Also may have better diversification within the portfolio which may reduce overall risk or volatility of returns.

And because many different investors funds will be pulled together portfolio managers tend to trade with bigger trade sizes. Meaning they will be able to extract better pricing from stock Brokers resulting in lower trading costs.

The main downside of investing through the investment management industry is that you have to pay for the service of professional portfolio Management in the form of management fees in the case of mutual funds. These fees are paid by the fund itself rather than by the individual investor, but this will still have a negative impact on the return the investor makes