Do you know a wrap account? In recent years, it has become popular as an easy way to get started by those who have assets such as wealthy people in the trendy asset management. We will introduce the advantages and disadvantages of such a wrap account.
What is the wrap account?
A wrap account is an asset management service in which a securities company entrusts funds from investors and comprehensively handles everything from investment decisions to trading and consulting, from investment to management.
You can start a wrap account by contracting with a securities company or a trust company. As the name of the wrap account, "SMA (Separately Managed Account)" and "fund wrap" are often used in many countries. SMA is a wrap account that offers a wide range of investment destinations, from stocks to bonds and investment trusts, and allows you to invest assets directly.
One of the characteristics of SMA is that the minimum investment amount is high, and there are tens of millions to hundreds of millions of units, and SMA is a wrap account for the wealthy.
Fund wrap is a wrap account that has appeared in recent years and has gained popularity. Like SMA, it is a service that entrusts assets to financial institutions, but the products it manages are basically investment trusts, and different types of investment We will manage multiple trusts in combination.
One of the characteristics of fund wrap is that the minimum investment amount is low, and you can start from millions of dollar, and if it is cheap, you can start from hundreds of thousands of dollar.
Whether it's SMA or fund wrap, you can leave all your assets to yourself, so you have the advantage of having the peace of mind of leaving it to a professional and not having to buy or sell or review your portfolio yourself.
Wrap account fees are generally not a fee for each sale, but a system in which a fixed rate is regularly levied on the asset balance or a system based on a performance fee.
Benefits of Wrap Account
The advantage of a wrap account is that you can leave your assets to an asset management professional.
For example, if you want to manage assets of tens of millions to hundreds of millions of dollar yourself, you have to search for stocks, bonds, and other funds to invest from scratch.
In addition, when considering the operation destination, you must also judge disasters and geopolitical risks yourself. However, with SMA, which is one of the wrap accounts, investment professionals can make appropriate decisions using fundamental and technical skills.
Also, if you have a wrap account, there are no fees when buying or selling. One of the great advantages of wrap accounts is that investors can choose from one, such as the risks they want to take, the risks they don't want to take, and the products they want to include in their portfolio, although they don't have to manage them themselves.
Disadvantages of wrap accounts
The first disadvantage of wrap accounts is that they are expensive. There is a 1% to 2% commission, which means that if you don't get at least more returns, you'll lose.
In addition, there is a risk that financial products managed by affiliated companies, high-risk stocks, bonds, and investment trusts will be incorporated.
In the case of fund wrap, a portfolio is composed by combining multiple investment trusts. In this case, the fee that must be paid to the wrap account itself and the trust fee to be paid to the company that manages the investment trust must be paid. Must be. In such cases, the minimum yield that must be met is higher, which increases the risk of loss.
Use your wrap account carefully
We have introduced the wrap account, which has become popular in recent years and the number of users is increasing.
Wrap accounts are gaining in popularity as they can significantly ease the asset management that you had to think about, as you can leave your assets to investment professionals.
Certainly, I am very happy to be able to leave my assets to professionals and to change the products to be included in my portfolio according to my risk appetite.
However, considering the disadvantages, it is important to thoroughly research and utilize it carefully when leaving your important assets to the wrap account.
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