Money management encompasses various processes, including budgeting, saving, investing, spending, and overseeing the capital usage of individuals or groups. It can also specifically refer to investment management and portfolio management.
When it comes to financial markets, money management often refers to investment professionals who make decisions regarding large pools of funds, such as mutual funds or pension plans.
Here are the key takeaways regarding money management:
- Money management broadly includes recording and administering the finances of individuals, households, or organizations.
- The term can also refer to investment and portfolio management.
- Financial advisors and personal finance platforms, such as mobile apps, are increasingly popular for helping individuals manage their money effectively.
- Poor money management can lead to cycles of debt and financial strain.
- The biggest money managers in terms of assets under management (AUM) are BlackRock, Vanguard, and Fidelity.
Understanding Money Management
Money management is a comprehensive term that covers services and solutions across the entire investment industry.
Consumers have access to a wide range of resources and applications that allow them to individually manage almost every aspect of their personal finances. As individuals increase their net worth, they often seek the assistance of financial advisors for professional money management. Financial advisors are usually associated with private banking and brokerage services, providing support for holistic money management plans that may involve estate planning, retirement, and other aspects.
In the growing financial technology market, personal finance apps exist to help consumers with various aspects of their finances.
Money management by investment companies is also a central aspect of the investment industry. Investment companies provide individual consumers with investment fund options that cover all asset classes in the financial market. They also support the capital management of institutional clients, offering investment solutions for institutional retirement plans, endowments, foundations, and more.
Top Money Managers by Assets
Global investment managers offer retail and institutional investment management funds and services that cover every investment asset class. Actively managed funds and passively managed funds are two of the most popular types of funds. Passively managed funds replicate specified indexes and typically have low management fees.
Here are the top global money managers ranked by assets under management (AUM):
1. BlackRock Inc.:
BlackRock Inc. was launched in 1988 as a $1 division of the BlackRock Group. By the end of 1993, its assets under management reached $17 billion, and by 2022, that number had grown to an impressive $8.6 trillion.
BlackRock's exchange-traded fund (ETF) division, iShares, manages around $2.5 trillion in AUM globally, accounting for approximately 29% of the group's total assets. The firm employs around 13,000 professionals and has offices in more than 30 countries worldwide.
2. The Vanguard Group:
The Vanguard Group is a well-known investment management company that serves over 30 million clients across 170 countries. It was founded by John C. Bogle in 1975 in Valley Forge, Pennsylvania, as a division of Wellington Management Co., where Bogle was previously chair.
Since its inception, Vanguard has grown its total assets to over $8 trillion, making it the world's second-largest asset manager due to the popularity of its low-cost investment funds.
3. Fidelity Investments:
Fidelity Management & Research Co. was established in 1946 by Edward C. Johnson II. As of December 31, 2022, Fidelity had more than 40 million customers with a total of $10.3 trillion in assets and $3.9 trillion in AUM.
The firm offers numerous mutual funds, including domestic equity, foreign equity, sector-specific, fixed-income, index, money market, and asset allocation funds.
Money Manager vs. Asset Manager
While money managers primarily manage money and asset managers handle assets, the two terms are closely related. Assets essentially represent money, so money managers and asset managers can be considered the same thing in many cases.
The Main Principles of Money Management
The main principles of money management revolve around income, investing, savings, and spending. By striking the right balance between these principles, individuals can maximize their financial well-being.
The Goal of Money Management
The ultimate goal of money management is to maximize wealth. By effectively managing their money, individuals and organizations can make sound financial decisions that lead to long-term growth and prosperity.
In conclusion, money management involves the careful handling of finances, including budgeting, saving, investing, and spending. It can refer to both individual and institutional management of capital. Financial advisors, personal finance apps, and investment companies play vital roles in helping individuals and organizations manage their money effectively. The top money managers globally are BlackRock, Vanguard, and Fidelity, overseeing significant assets under management. By following the key principles of money management, individuals can work towards maximizing their financial success.
