Separate accounts (SA) are investment portfolios managed by professionals on behalf of an individual. Unlike investing in a mutual fund or any other commingled fund, SA investments contain a variety of stocks, bonds, and other asset types. Also called separately managed accounts (SMAs), this investment vehicle is essentially like having your own fund manager pick all your investments. SAs are a great fit for some investors, but they are not for everyone. Other investors are better off sticking to commingled funds. The following are some circumstances in which you would want to invest in a commingled fund rather than a separate account.

Immediate Liquidity is Not Needed

Separate accounts tend to be more liquid than their commingled counterparts, so investors who need easy access to their money or the ability to frequently change their investments can do well with an SA. However, if you do not need immediate liquidity, placing your money in a commingled fund may be a better and less volatile option.

Wanting a Return

SAs allow investors to personalize their investment strategies. For instance, an investor may opt to only invest in companies with a mix of international and domestic operations or to focus on a certain industry as a hedge against other investments. Commingled accounts often include such a broad mix of investments that finding a portfolio to fit such specific requirements may be next to impossible. However, if you do not require that level of specificity and are only focused on getting a return, commingled accounts make it easy.

Limited on Time or Knowledge

Having a dedicated manager for your investment, like in a separate account, requires some personal input. You need to have an understanding of different investments, the benchmarks used for performance and the parameters by which your account manager handles your investments. If you do not have the time to devote to doing this properly or the knowledge to fully understand the concepts presented, sticking with a commingled account is likely safer. In commingled accounts, a fund manager is constantly tweaking the portfolio distribution, trying to earn you the best return with the lowest risk possible.

Being a Risk Averse

Separate accounts tend to be riskier than commingled funds. You have to consider credit risk as well as liquidity risk, and there is interest rate risk and spread risk to take into account. In commingled accounts, the risk is much more generalized. These issues still exist, but they are handled without your involvement.