The Difference Between Financial Management and Investment Management

Financial management is often confused with finance, which is more commonly used to describe the process of managing the financial resources of an organization. In fact, both fields share many common characteristics. These commonalities help explain the importance of the former in business as well as the benefits of the latter. However, even though they may have similar traits, financial management and finance are not one and the same thing.

Financial management refers to issues regarding the study, development, and management of financial resources and assets, usually including the acquisition, distribution and allocation of such resources. Specifically, it refers to the study of why and how an organization, country or business acquires the needed funds, known as capital, and then uses or invests this capital. Financial management also includes the analysis and evaluation of the performance of various financial resources and assets. The activities of financial managers often include the preparation of strategic plans and budgets and the analysis of organizational performance.

On the other hand, investment management refers to the management of investment-related activities. Investment management can be divided into two broad categories, namely, asset management and equity management. Asset management refers to the management of financial resources and assets owned by an organization. The most common assets owned by most companies are land, buildings and equipment. Equity management refers to the management of financial resources that belong to shareholders and other creditors of an organization. owned by investors include stocks and bonds and financial derivatives, including currencies and other financial instruments.

The scope of financial management and investment management also includes issues of investment banking, which deals primarily with financial products such as commercial loans, credit lines, and business securities. While financial management primarily deals with the allocation of capital, investment management deals primarily with the creation of financial products. Examples of financial products created by investment managers include stock and bond mutual funds, bond funds, investment trusts and other forms of fixed annuities. Investment banks also create financial products based on the research of business leaders, in particular those who have a proven track record in creating successful businesses.

While asset management refers to the allocation of capital, equity management refers to the creation of financial products. Examples of financial products created by equity managers include stock options, futures contracts, and mutual funds. The two categories of financial management and investment management are not necessarily exclusive. In fact, they are frequently used to allocate capital and create financial products. In addition to these two categories, there are also finance and lending institutions, which deal specifically with the production, distribution, allocation and regulation of loans, credit, financial products and securities. and loans. These types of institutions may also be included in the finance and lending categories.

Finance and lending institutions refer to the allocation of credit, loans, credit lines and securities, which are utilized to finance or to acquire the purchase of financial products. These include credit cards, loans, and mortgages. The allocation of credit is determined by lenders, who issue and distribute credit cards, and brokers, who provide loans, either through retail wholesale, investment or commercial accounts. Loans are a form of finance, as well as the financing of the purchase of securities, the use of which is used for business purposes. Credit cards are a type of loan, and the mortgage is another form of financial support.