Financial Planning Terms & FAQs

A strategy that optimizes asset allocation to maximize returns for a given level of risk through diversification.

A strategy where portfolio allocations are adjusted based on short-term market trends to outperform a benchmark.

A long-term approach that sets target allocations for various asset classes based on risk tolerance and goals.

Investments outside of traditional stocks and bonds, such as private equity, hedge funds, or commodities.

The risk of being unable to sell an investment quickly without significant price reduction.

An investment strategy that seeks to outperform the market by weighting assets based on factors such as value, size, or volatility instead of market capitalization.

Key types of asset management include active management, where managers aim to outperform the market; passive management, which tracks a benchmark index; robo-advisory services offering automated, low-cost investing; and quantitative management, using data-driven models. Other options include alternative management for assets like private equity and real estate, and value vs. growth strategies based on company fundamentals and growth potential.

Asset management focuses solely on investments, aiming to maximize returns through a well-diversified portfolio aligned with a client’s goals. Wealth management is more comprehensive, encompassing not just investments but also tax planning, estate planning, and financial advice for long-term financial health. Wealth management is typically tailored to high-net-worth individuals, addressing the entirety of their financial situation.

Investment services include financial planning for overall financial health, brokerage services for trading assets, portfolio management for professional investment handling, and robo-advisory for low-cost, automated strategies. Higher-level services include private wealth management for complex needs and retirement planning, which specializes in strategies for income and asset growth through retirement.

An investment consultant advises clients on developing and executing investment strategies based on their goals, financial position, and risk tolerance. They use market insights and economic analysis to suggest asset allocations, and they serve both individual and institutional clients. Investment consultants play a key role in aligning clients’ portfolios with their objectives and adjusting as needed.