Investment products are an easy and efficient way to get access to a variety of asset classes and strategies. Investment products for this course are to be considered ways to get exposure to different investment strategies. These investment strategies may be passive in nature (attempting to match an investment index, i.e. S&P 500 Index) or these strategies may be active in nature, with third-party investment managers making investment decisions on your behalf. Investment products will have associated fees for the underlying product provider to pay for managing the product, covering investment portfolio manager fees, trading fees, operational fees, etc. You are paying fees for the easy of access to investment strategies and potential added diversification that you may not be able to do well on your own.
For these investment products, in general, they consist of investments in multiple stocks, bonds, currencies, commodities, and/or other investment products. There are thousands of investment products out there to chose from, which can be very confusing for the average investor. I have been performing due diligence on these investment products since 2007 and will provide insights into how you can due your own due diligence on them in other courses/lessons throughout this site.
“Packaged products” is often a term used to define mutual funds, ETFs and closed end funds and can be easily accessible through buying and selling at a brokerage firm or through a financial advisor. Most are daily liquid, meaning you can buy and/or sell any day of the trading week. Some mutual funds may have less liquidity and only offer buying/selling at certain time periods and/or incur additional charges to buy or sell the mutual fund.
Private investments are generally less liquid, have higher account minimums, and may have net worth/income requirements as a “qualified/accredited investor”. These private investment can include private equity, private debt, private real estate, and various hedge fund strategies. The “sales pitch” for private investments is that approved investors get “special access” to private deals or specialized strategies that can provide better returns, better diversification, better, better, better. Based on my experience, a lot of these “special” private investments aren’t all they claim to offer and the fees are higher. Ever hear of a hedge fund blowing up? I have.
Separately managed accounts, or otherwise called “SMAs” are generally single strategies that investors can get access to where instead of the investor buying a mutual fund, ETF, closed end fund and not seeing the individual securities in those funds in their own account, an SMA allows an investment strategist to buy and sell the individual securities in your account.
Within this course we will dig a bit deeper into these different investment products and provide some guidance on how you should think about them in a bit more detail