A lot is said and written on the importance of investing your money, but not enough on the importance of an investment advisor in helping you invest your money. When it comes to investing, there have always been two schools of thought that often contradict one another. The first is the DIY or do-it-yourself group of investors. These investors give precedence to their own judgment, knowledge, and understanding over an investment professional. They learn and research about different ways to increase their gains, the best strategies to ensure profits, ways to reduce taxes and losses, etc. by themselves. They read the news, journals and are always up to date with the economic and financial conditions of the country to make sound investment decisions. DIY investors put in a lot of effort and time in gauging a situation and then take a call accordingly.
The other group of investors follows a different approach. This group of investors prefers taking investment decisions based on professional advice. They prefer professional expertise over self-assessment. They are more likely to hire a financial advisor to guide them towards their financial goals. This way, they spend little time and effort themselves and rely more on the professional’s advice.
There is no fixed approach to investing, and investors from both these groups can ultimately receive the desired results. But if you are wondering which way to go, it is important to first understand what investment specialists do. Read on to understand their role so you can decide whether or not you want to hire one.
An investment professional is someone who can help you pick out suitable investment options, help you decide the right amount of money to invest in these options based on your goals, guide you on when and how to redeem your investments to minimize taxes, and do a lot more. An investment advisor is not just someone who recommends a particular investment instrument. This professional also helps you diversify your investments, pick the right investments based on your age, rebalance your portfolio from time to time, and help you with your debt liabilities.
The role of an investment advisor is not limited to just pointing out suitable instruments. It also includes multiple other approaches and methods to ensure that these investments work in your favor, no matter your age or your changing requirements.
Now that you know what an investment specialist does, find out if you need to hire one.
Before you decide whether or not you should get an investment advisor, you should ask yourself these questions:
Investing your money can be a life changing experience in more ways than one. If you are financially secure, you can live a dignified and comfortable life. You can cover expenses like travel, home purchase, children’s higher education expenses, as well as live luxuriously and do a lot more.
Fulfilling your goals with your income is largely unattainable. This is true for several reasons. Firstly, your income is not likely to grow at the same rate as inflation. Secondly, you can lose your job at any time and not have an income to rely on. Take the Covid-19 pandemic, for example. A global event that nobody could have expected forced hundreds of thousands of people out of their jobs. In such a situation, it was their investments and savings that helped them stay afloat. Thirdly, your income will only support you till you retire. Once you grow old and are unable to work, you would require a retirement corpus to cover your expenses. This can be made possible by investing your money wisely.
Investing your money is one of the most crucial tasks you will ever undertake. Therefore, you need to be sure of your caliber and knowledge to be able to make such decisions.
Investments are a broad category of different instruments ranging from mutual funds to direct equity, bonds, real estate, gold, treasury bills, government securities, 401(k)s, Individual Retirement Accounts (IRAs), Health Savings Accounts (HSAs), and more. While you may have an understanding of some of these instruments, you would likely lack knowledge of them all. Here’s an example - in the last couple of years, cryptocurrencies have taken over many investment portfolios. Not a lot is known about them even today, and there are no historical records to gauge their future performance. A novice investor may invest in them based on recommendations from peers or the internet hype. But the likelihood of success can be highly unpredictable.
An investment professional is someone who helps people invest their money for a living. This is a trained, qualified, and experienced individual who can gauge multiple factors and offer comprehensive advice. While you may have limited information to invest in new, unknown, or unpopular investments, a professional will have detailed data to support their recommendations. So, ask yourself if you thoroughly understand different investment options and are well-equipped to pick and choose from them or not.
Even with ample knowledge, you may not always receive the returns that you hoped for. This can be due to a lack of time. Your career, family, social life, health, hobbies, etc., can make up for most of your time. With the jam-packed schedules of today, it can be extremely hard to find the time to manage your investments yourself. To ensure favorable returns, you have to diversify your portfolio, rebalance it from time to time, plan your purchase and redemption well, etc. All of this takes time. You have to be up to date with the political, economic, and global events and preempt their impact on your investments. If you are investing in stocks, you would also need to research well and find out how the company is doing, its business health, future growth prospects, and more. While you may or may not have the time and energy to do this, an investment professional could do this on your behalf and ensure that you do not miss out on crucial opportunities.
The simplicity or intricacies of your financial goals can also determine your need for an investment advisor. If your goal is to save for retirement, you can do so by investing in an IRA or a 401(k). But if your goal is to save for retirement and your child’s higher education expenses, you would need to invest in a 529 plan along with your retirement accounts. Moreover, if you also need to purchase a home in the same timeline, you would need to invest more in instruments that can offer higher returns. Individual goals may be achievable without professional help, but multiple goals can require a more exhaustive approach.
Although there is no fixed answer to this as everyone’s needs can differ, the following times and situations can be a good time to hire an investment advisor:
Here are some of the pros of hiring an investment advisor:
Hiring an investment advisor is your choice. And now that you know what an investment advisor is and what investment specialists do, you can decide if you want to hire one or not. Keep in mind that while it may seem like hiring a financial advisor is an added expense, it can greatly benefit you in other ways. So, instead of looking at short term costs, try to focus on the bigger picture.
If you wish to seek professional assistance, feel free to use our free advisor matching tool that will match you to vetted financial advisors near you that can help with your specific investment needs. The match service matches you to 1-3 screened advisors that you may compare. There is no obligation to hire.
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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.