Mutual funds are the entry level, mass-market version of managed money, and serve as an excellent introduction to the concept. For an investor with over $100,000, it's time to be weaned off mutual funds and into an up-scale diversified personalized portfolio. Mutual funds do have their uses however, the main one is to help small investors achieve that diversification. Until you have amassed that $100,000, you can't truly invest, which is money earning more money. What you are really doing by squirreling away a couple hundred a month into a mutual fund is saving, which is what you do before you invest. In the early years most of your gains come from what you put in, not from what it has earned. Use a mutual fund only to save.

As explained above, the mass-market form of money management is mutual funds. The next level is essentially collections of mutual funds, which may be called mutual fund wrap programs at a fee similar to most broker sold mutual funds. The next level is where cost savings start to occur. Pooled funds, which are similar to mutual funds, are sold by offering memorandum rather than prospectus and carry high minimum investment levels. Separately managed accounts are the top of the high net worth pyramid and represent the Cadillac of managed money. Individual stocks and bonds are held in the investor's name, separate or segregated from other investors. This is distinct from the pooling concept of mutual funds in which all the investor's money is in effect put in to a big pot, with each investor owning units in that pot rather than the underlying securities themselves.

While a believer in mutual funds' ability to provide most small investors with diversification, good rates of return, and peace of mind, fund investors need to take the next logical step in their investment lives. Many investors are beginning to choose a more formal managed money relationship. Research by Investor Economics Inc. report there is an extensive shift going on among affluent investors from retail mutual funds to investment counsellors.