Investment Management Firms Key Terms

Learn the lingo to work with investment management firms

By Sandy Baker

Investment management firms are critical to everyday investing. They help businesses, non-profit organizations and private investors manage their investments. These firms often maintain a wide range of account types including hedge funds, mutual funds and pensions. Investment managers work one-on-one with investors or oversee a group of accounts, handling the investments they make. These firms must work to meet the group or individual's goals according to the risk tolerance of the investor. Most people who invest in retirement accounts or the stock market work through investment management firms.

Hedge funds

Hedge funds are a form of investment often handled by investment management firms. They trade options or bonds and buy and sell undervalued securities. They may be used for short-term or long-term goals. They reduce volatility while preserving their capital.
Try: Magnum Global Investments offers more information on hedge funds.

Mutual funds

Many investment management firms offer mutual funds. These funds bring together a wide range of investors to invest in a set of stocks, bonds or other investments. Each investor maintains his or her own shares, which is part of the group's holdings.
Try: The U.S. Securities and Exchange Commission offers more information online and through publications on mutual funds.

Pension

An investment firm may manage a pension or pension plan on behalf of an individual or a company. This is a type defined benefit plan where an employer contributes funds toward the retirement of an employee.
Try: CNN Money offers more information on pensions.

Investment manager

Investment managers oversee the accounts of a business, city or private individual. They work within the investment management firm to provide services to the company. The individual may manage several accounts or just one, depending on experience and the account's size.
Try: The City of Phoenix provides a job description of an investment manager. The duties included here are similar to those required for all types of investment managers.

Investment portfolio

An investment portfolio is a term used to describe a number of investments an individual has. In most cases, it offers a mixture of investments. The entire portfolio may have specific goals, such as risk tolerance.
Try: The American Institute of Certified Public Accountants offers a full description of what an investment portfolio is and how it is used.

Risk tolerance

Risk tolerance is the amount of risk an individual or group is willing to take on. This is often a personal decision on how much risk an individual is willing to consider in terms of investment strategies.
Try: MSN Money offers an in-depth look at risk tolerance.