Many folks think financial advice is for the wealthy. Not true! In my experience, it's the not-so-wealthy who need expert guidance to move to the next level. We have not been given the tools in our formal education. Most of us fly by the seat of our pants. Many have no plan at all so the end result is haphazard.
Reading financial magazines and books helps us become familiar with the lingo/jargon of the industry and prepares us to meet and comprehend an advisor.
When should we seek advice?
- at a young age after getting our first job. Here we'll learn the benefit of saving and using a 401k/403b. Maybe even get some direction about cash flow (aka budgeting). An advisor can help us get off to a strong start!
- getting married where an advisor may offer ways of combining assets and setting common goals. Also, he/she may offer guidance about protecting assets.
- mid career when we feel we're not meeting our financial goals. We need someone to point out our mis-steps and get us back on track.
Or if our career has catapulted us into higher income, how best to invest those extra dollars.
- birth of children for suggestions how we must stretch those dollars if one partner will stay at home or how to afford the high cost of child care. In addition, where to find the extra money to fund an education account.
- inheritance (or winning the lottery), when extra money appears and before we celebrate too aggressively! This one-time event can be a real blessing in reducing debt, buying a house or fulfilling other dreams.
- divorce, actually prior to meeting with a divorce attorney, to receive guidance on how to structure a settlement and protect yourself.
- death of a partner or spouse to help determine how to survive as a single and the financial implications of being alone.
- prior to 55 to plan for retirement. A good advisor can help us learn if we have "enough" to retire. We may have to work longer or change our life style. Also, we'll learn the best time to file for Social Security. Prior to 55 gives us time to double up on savings or reduce spending before leaving the workforce.
- in retirement to devise a plan for tapping into our nest egg in the most tax-efficient way. We'll determine our sources of income and learn where to find guaranteed streams of income and how large our cash reserve should be.
Financial advice is for those who want to become wealthy or to retain their wealth. The best advice may come from a fee-only advisor who has our best interests at heart.
Be $ Smart - seek financial advice throughout life to grow and protect our wealth.
Showing posts with label financial advisor. Show all posts
Showing posts with label financial advisor. Show all posts
Sunday, March 18, 2018
Tuesday, April 14, 2015
Diversification in Investing
In any given day or any given year we have no idea which part of the market will perform well or under perform. The purpose of diversification (not putting all your eggs in one basket) is to have some money in several different areas to take advantage of an upward move and to protect against a downward move.
Asset allocation allows you to divide your money into:
Stocks,
Bonds,
Cash and
Alternatives.
And, within each of those categories are several smaller subcategories.
Stocks may include:
- large companies - large cap,
- mid-size companies,
- small companies.
Stocks may be bought in different "sectors" such as:
- Drugs (pharmaceuticals) & health care,
- Transportation,
- Consumer Products,
- Utilities - gas, electricity, telephone,
- Advertising, marketing, social media,
- Financials - banks, brokerage houses,
- Real Estate - office building, malls, apartment buildings.
Stocks may also cover different geographic areas:
- Domestic, meaning only U.S. companies,
- Foreign or international - outside the U.S.,
- Developed countries - in U.S., Europe, South America or Asia,
- Emerging markets, may be found in Africa, Indonesia.
And you may purchase mutual funds that include combinations of all those listed.
A diversified portfolio means holding some of these many choices so you have the exposure to both grow and protect your money. How do you know which ones to buy? It can be quite a challenge! Do the research yourself or find an advisor whom you trust to make the task easier but you still must play an active role of asking questions and reading statements.
Be $ Smart - plan a diversified portfolio for both opportunity and protection.
Asset allocation allows you to divide your money into:
Stocks,
Bonds,
Cash and
Alternatives.
And, within each of those categories are several smaller subcategories.
Stocks may include:
- large companies - large cap,
- mid-size companies,
- small companies.
Stocks may be bought in different "sectors" such as:
- Drugs (pharmaceuticals) & health care,
- Transportation,
- Consumer Products,
- Utilities - gas, electricity, telephone,
- Advertising, marketing, social media,
- Financials - banks, brokerage houses,
- Real Estate - office building, malls, apartment buildings.
Stocks may also cover different geographic areas:
- Domestic, meaning only U.S. companies,
- Foreign or international - outside the U.S.,
- Developed countries - in U.S., Europe, South America or Asia,
- Emerging markets, may be found in Africa, Indonesia.
And you may purchase mutual funds that include combinations of all those listed.
A diversified portfolio means holding some of these many choices so you have the exposure to both grow and protect your money. How do you know which ones to buy? It can be quite a challenge! Do the research yourself or find an advisor whom you trust to make the task easier but you still must play an active role of asking questions and reading statements.
Be $ Smart - plan a diversified portfolio for both opportunity and protection.
Wednesday, November 26, 2014
Becoming a Better Investor - Whom to trust?
The financial services industry can be very confusing and intimidating. Many people either stay away or jump in blindly and get fleeced.
So how do you find someone to help and guide you?
Let's start with some titles and designations:
Financial Advisor - a very broad term which translates to someone who can help you with finance and investments.
WMA - Wealth Management Advisor - same as financial advisor but has more snob appeal.
CFP - Certified Financial Planner - a person who has taken many courses and passed a rigorous exam covering all the aspects of personal finance. They have a good grasp of money management and investing.
Stock broker - aka Financial Advisor - this person has passed the Series 7 exam, is register with the SEC (Securities and Exchange Commission) and has a good knowledge of investing.
Let's review how they get paid:
Financial advisor, WMA and stock broker rely essentially on sales. The more they sell you, the more commissions they make. (Both buy and sell orders generate commissions for the broker.) If you are being advised to buy and/or sell often, the only person making money is your broker.
A Fee Only Financial Planner prepares a comprehensive plan for you and your family. It may include buying a home, additional education for you or your spouse, education for your children, taxes and other financial goals leading to retirement. Since this plan takes many hours of gathering information and analysis the planner will charge a substantial fee - somewhere between $1000 to $2500 or more, depending how complicated your situation may be. The planner then sends you to a financial advisor or broker to implement the plan.
Another type of Financial Planner will prepare a less comprehensive plan and implement it for you. The fee for the plan will be covered by the charges for investing. (You don't get the plan for nothing.)
Remember to ask:
"What's this going to cost me? How do you get paid?"
There are ways for you to determine if a broker or investment advisor is a bad apple. Go to BrokerCheck at finra.org website or call the BrokerCheck hotline 800-289-9999. Here you will learn a broker's current license status and history, employment history and any reported regulatory proceedings, disputes and settlements.
(FINRA - the Financial Industry Regulatory Authority is the self-regulator for the securities industry.)
When you work with a financial professional it is important to know the extent of his/her expertise in the various areas of finance. Although they may exhibit a certain level of knowledge, there is no test or regulation for integrity and trust. You must seek a professional who is worthy of your trust and the care of your money.
Be $ Smart - take the time to research and interview financial advisers before you give them your hard earned money.
So how do you find someone to help and guide you?
Let's start with some titles and designations:
Financial Advisor - a very broad term which translates to someone who can help you with finance and investments.
WMA - Wealth Management Advisor - same as financial advisor but has more snob appeal.
CFP - Certified Financial Planner - a person who has taken many courses and passed a rigorous exam covering all the aspects of personal finance. They have a good grasp of money management and investing.
Stock broker - aka Financial Advisor - this person has passed the Series 7 exam, is register with the SEC (Securities and Exchange Commission) and has a good knowledge of investing.
Let's review how they get paid:
Financial advisor, WMA and stock broker rely essentially on sales. The more they sell you, the more commissions they make. (Both buy and sell orders generate commissions for the broker.) If you are being advised to buy and/or sell often, the only person making money is your broker.
A Fee Only Financial Planner prepares a comprehensive plan for you and your family. It may include buying a home, additional education for you or your spouse, education for your children, taxes and other financial goals leading to retirement. Since this plan takes many hours of gathering information and analysis the planner will charge a substantial fee - somewhere between $1000 to $2500 or more, depending how complicated your situation may be. The planner then sends you to a financial advisor or broker to implement the plan.
Another type of Financial Planner will prepare a less comprehensive plan and implement it for you. The fee for the plan will be covered by the charges for investing. (You don't get the plan for nothing.)
Remember to ask:
"What's this going to cost me? How do you get paid?"
There are ways for you to determine if a broker or investment advisor is a bad apple. Go to BrokerCheck at finra.org website or call the BrokerCheck hotline 800-289-9999. Here you will learn a broker's current license status and history, employment history and any reported regulatory proceedings, disputes and settlements.
(FINRA - the Financial Industry Regulatory Authority is the self-regulator for the securities industry.)
When you work with a financial professional it is important to know the extent of his/her expertise in the various areas of finance. Although they may exhibit a certain level of knowledge, there is no test or regulation for integrity and trust. You must seek a professional who is worthy of your trust and the care of your money.
Be $ Smart - take the time to research and interview financial advisers before you give them your hard earned money.
Friday, July 25, 2014
Third in a series - THE Important Conversation
As you may have guessed, the past two Tips were the primary steps in "putting your financial house in order." Be it your house, your parents' or a friend's, it all makes life easier when you are organized and can find important information quickly and in an emergency.
Other information to have readily available would be a
List of Professionals including their name, address and phone number:
Attorney
Accountant
Financial Advisor
Insurance Agent
A List of Investments including the name of the institution, account number, phone number and online access (User ID and PWD):
Brokerage accounts
Checking and Savings Accounts
Pension
IRA
401k or 403b
529 College Savings Plan
ESOP (employee stock ownership plan)
You may organize all this information in a 3-ring binder. Ideally, update it annually. Or you may buy a book with all the categories organized and separated for you. There are several offered by Amazon or any bookstore. e.g. Putting Things in Order or Get It Together: Organize Your Records so Your Family Won't Have To.
Be $ smart - put your financial house in order to give you quick and easy access as well as peace of mind.
Other information to have readily available would be a
List of Professionals including their name, address and phone number:
Attorney
Accountant
Financial Advisor
Insurance Agent
A List of Investments including the name of the institution, account number, phone number and online access (User ID and PWD):
Brokerage accounts
Checking and Savings Accounts
Pension
IRA
401k or 403b
529 College Savings Plan
ESOP (employee stock ownership plan)
You may organize all this information in a 3-ring binder. Ideally, update it annually. Or you may buy a book with all the categories organized and separated for you. There are several offered by Amazon or any bookstore. e.g. Putting Things in Order or Get It Together: Organize Your Records so Your Family Won't Have To.
Be $ smart - put your financial house in order to give you quick and easy access as well as peace of mind.
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