For individuals looking to increase net worth and plan for retirement, institutional investing is the clear choice. It’s one of the most fundamental, commonly used, and highest-yielding investment approaches.
Are you considering institutional investing as a way to grow your portfolio? This guide will answer some basic questions you may have.
What Is Institutional Investing?
An institutional investing company is a firm that invests money on behalf of clients. These investments can take various forms, such as:
- Direct stock ownership
- Separately Managed Accounts
- Real estate
- Loan origination
- Mutual funds
- Hedge funds
- 401(k) retirement accounts
Institutional investors are subject to fewer restrictions than retail investors, making them more flexible operators. Institutions are also advantaged by their ability to perform deep research and their possession of substantial capital.
What Are the Benefits of Institutional Investing?
Institutional investors benefit from knowledge and opportunities beyond what’s available to retail investors. These advantages are passed on to clients. This applies especially when the institution operates on a fiduciary basis—bound to work in the best interest of clients.
Once invested, you’re connected to a team of financial experts. Your money has new ways to grow in respect to your risk preferences, and you’re freed from the burden of micromanaging your retirement assets.
Here’s a bit more detail on the key benefits of institutional investing.
Lean on Professional Expertise
Working with an investment and advisory team brings priceless peace of mind.
The more informed and engaged you are in your retirement planning, the better. However, it’s crucial to be backed by a strong team.
When working with an institutional entity, you know that they’ll make informed decisions for you. You won’t have to do the heavy lifting on each investment decision.
No investment is entirely safe from loss. However, diversification is considered by financial experts to be the single most important facet of investment risk reduction.
Your institutional investor will likely distribute your funds into several different types of investments. The capital that your investment is pooled with makes it possible for the institution to flexibly manage exposure to different industries and asset classes.
The resulting diversification protects your bottom line against economic downturns that occur in any one sector.
Your Best Interests in Mind
When an institutional investor operates on a fiduciary basis, that means that they’re obligated to act in your best interest. Fiduciary is not simply a descriptive, idealistic term; rather, it’s defined by the US Department of Labor.
Financial advisors are either fiduciary or non-fiduciary. Investors are sometimes surprised to learn that not all financial advisors are fiduciaries.
The Securities and Exchange Commission mandates the following for fiduciaries:
- Cannot recommend investments that don’t benefit the client or investments that carry higher fees in comparison to virtually identical investments
- Must act with loyalty and good faith
- Cannot mislead clients
- Cannot use a client’s assets for their own benefit
- Must avoid conflicts of interest
Essentially, fiduciary advisors must fully prioritize their clients’ best interests. Each investment decision made by the institution reflects that priority.
A fiduciary takes an interest in your history and your needs. While a non-fiduciary advisor may provide recommendations that are merely “suitable,” a fiduciary advisor recommends only the best available options.
Large Market Presence
Institutional investing comprises a significant majority of all investments made in the United States. Institutional investors are considered better able to protect themselves in comparison to retail investors. Therefore, fewer protective regulations apply, allowing institutions to invest more freely.
By working with an institutional investor, your tap into their resources, expertise, and power. Your investments can be spread across many different industries and types of investments, rather than limited to a niche handful.
The strength and diversification provided by an institution greatly enhance your odds of a successful investment payoff.
Start Institutional Investing in Idaho
Journey Financial is an independent investment and advisory team specializing in investment management, retirement plans, and estate planning. We offer institutional investing for those who seek a more secure financial future.
As fiduciary advisors, we prioritize communication, education, and shared success. Our clients understand their plans and how we’re working to help make retirement dreams come true.
Investment success occurs when you understand your portfolio and have full confidence in the high-quality assets that you own.
If you live in Idaho and would like to learn more about institutional investing, contact us any time to get started.