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Do You Need a Personal Trainer for Your Portfolio?
Ernie Ankrim
 by Ernie Ankrim
Director of Portfolio Strategy
In recent articles, we've examined the importance of reflecting on what you learned about investing — and yourself — during the market's volatility over the past few years.
Looking in retrospect, you may be surprised at how your views have changed. In 1998 and 1999, it seems, many investors had come to believe that they didn't need professional help to succeed at the investing game. The prevailing wisdom was: "What's the big deal? All you have to do is buy stocks."
As we now know, that kind of undisciplined strategy has major pitfalls. So it's no surprise that, after some soul-searching, more than a few investors are realizing that they just don't possess the personal discipline, time and/or energy to keep their portfolio on track in either runaway markets or serious downturns. That's where financial advisors come in.
Call in the Professionals
Recognizing that we may not be able to do everything ourselves can be humbling. But financial health, like physical health, is often difficult to maintain on our own. As life gets busier and more stressful, for example, more people are turning to personal trainers to help them stay focused and motivated.
A financial advisor can play the same role for your portfolio. He or she can help you maintain discipline, focus on your long-term objectives and avoid the temptations that will always be present. A financial advisor can also lend an ear, offer advice and take away the pressure you might otherwise face going it alone.
The term "financial advisor" shouldn't be read to mean someone who simply feeds you new stock ideas; nor someone who makes every investment decision for you. After all, personal trainers don't do the situps — they motivate you to do them yourself. A "financial advisor" is someone who helps you devise a well-rounded, long-term strategy that makes sense for your personal situation and goals, then works with you over time toward achieving it.
Find the Right Partner for You
Whether you're looking for a personal trainer or financial advisor, you have to find one with a regimen that you can understand and appreciate. A good financial advisor should be able to explain the hows and whys of their investment philosophy in depth. If they can't, move on.
Keep in mind that the right financial advisor for you won't necessarily be the one who accepts each and every one of your decisions at face value. Any personal trainer and financial advisor committed to helping you achieve your long-term goals will occasionally ask you to avoid things that seem irresistible, whether that means a huge helping of cheesecake or a huge helping of technology stocks. Someone who can intelligently question your motives for making certain decisions can help you become a smarter investor.
Delegate, Delegate, Delegate
Once you've found a financial advisor with attributes worthy of advising you and your money, it's important to determine what sort of role you'd like him or her to play in your portfolio. Spending some time separating the things you feel you're good at from the things you'd like to hand off can make the relationship more productive. Take time to talk with your financial advisor about what investment decisions you have been happy with and what you'd like to avoid in the future. He or she can help you identify behavior patterns that you might otherwise miss and give you the resolve to avoid repeating those mistakes in the future.
Copyright © Russell Investments Canada Limited 2008. All rights reserved. See Important Legal Information. Date of first use: 05/23/01.
Past performance is not a guarantee of future performance.
This is a publication of Russell Investments Canada Limited. It should not be construed as investment, legal, or tax advice. The contents are intended for general information purposes only, and you are urged to consult your own investment, legal, or tax advisor concerning your own situation and any specific investment questions you may have. For further information about these contents, please contact Russell Investments Canada Limited.
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