A Separately Managed Account (SMA) is an investment account managed by a professional investment manager that can be used as an alternative to a mutual fund. They provide diversification and professional management. But they differ from mutual funds in that an SMA investor owns individual stocks instead shares in a fund.
Here are some of the benefits of SMAs.
These are features that are attractive to certain investors. However, they are not for everyone. Most SMAs require minimum investments of $100,000. That means that they are only appropriate for high net worth investors who will typically use several SMA managers for purposes of diversification. In addition, the fees associated with SMAs are often higher than fees for mutual funds.
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Arie J. Korving, a CERTIFIED FINANCIAL PLANNER™ professional, has been delivering customized wealth management solutions to his clients for more than three decades. Prior to co-founding Korving & Company, he was First Vice President with UBS Wealth Management and held management positions with General Electric.