A managed account, also known as a separately managed account (SMA), is an investment portfolio owned by one investor and supervised by an experienced professional money manager. Managed accounts offer investors an opportunity to have their portfolio actively managed to achieve specific goals or to take advantage of opportunities that are outside of the scope of a typical “one size fits all” mutual fund.
With a managed account, the money manager can tailor the portfolio to meet the individual investor’s needs. Generally, the minimum investment amount required to open a managed account is quite high. Many money managers require a minimum of six figures to open a managed account and they typically receive a fee based on a percentage of the assets under management (AUM). This fee structure can mean that the overall cost to manage a portfolio is expensive and not suited for everyone.
Robo-advisors offer managed accounts at a lower cost for everyday investors who have a lower starting balance. These portfolios are algorithmically managed, meaning that the investing decisions are based on predetermined rules and requirements, rather than personalized for any individual investor. While robo-advisors are cheaper than a traditional money manager, they also may offer fewer customization options, less personal advice, and fewer tax-loss harvesting opportunities.
It is also important to note that a mutual fund is a type of managed account, but instead of only one individual being able to use it, the fund is open to anyone with the means to buy its shares. While the overall performance of a mutual fund may be better than a managed account, the individual investor has less control in terms of asset allocation, adjusting positions to meet their needs, or taking advantage of any potential tax strategies.
In conclusion, managed accounts provide an individual investor with a tailored portfolio that is supervised by an experienced professional money manager. Managed accounts primarily appeal to investors who have a higher starting balance and can afford to pay the set fee percentage for the money manager’s services. For everyday investors with a lower starting balance, a robo-advisor may be a more cost effective option. It is also important to note that a mutual fund is another managed account option, but it is open to the public with no customization based on individual needs.
With a managed account, the money manager can tailor the portfolio to meet the individual investor’s needs. Generally, the minimum investment amount required to open a managed account is quite high. Many money managers require a minimum of six figures to open a managed account and they typically receive a fee based on a percentage of the assets under management (AUM). This fee structure can mean that the overall cost to manage a portfolio is expensive and not suited for everyone.
Robo-advisors offer managed accounts at a lower cost for everyday investors who have a lower starting balance. These portfolios are algorithmically managed, meaning that the investing decisions are based on predetermined rules and requirements, rather than personalized for any individual investor. While robo-advisors are cheaper than a traditional money manager, they also may offer fewer customization options, less personal advice, and fewer tax-loss harvesting opportunities.
It is also important to note that a mutual fund is a type of managed account, but instead of only one individual being able to use it, the fund is open to anyone with the means to buy its shares. While the overall performance of a mutual fund may be better than a managed account, the individual investor has less control in terms of asset allocation, adjusting positions to meet their needs, or taking advantage of any potential tax strategies.
In conclusion, managed accounts provide an individual investor with a tailored portfolio that is supervised by an experienced professional money manager. Managed accounts primarily appeal to investors who have a higher starting balance and can afford to pay the set fee percentage for the money manager’s services. For everyday investors with a lower starting balance, a robo-advisor may be a more cost effective option. It is also important to note that a mutual fund is another managed account option, but it is open to the public with no customization based on individual needs.