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The Benefits
Making the Most of an Investment Professional's Expertise
Whether you're an experienced investor or just starting to map out your financial goals, a financial professional can help you in many ways.
Comfort
Some people like to travel the riskier roads — in financial terms, this generally makes for potentially higher highs and lower lows. Others select a more predictable road and look for consistency to help meet their goals. No matter what your preference, a financial professional can create an investment plan designed to fit your comfort level and personal situation.
Problem Solving
Most people encounter a little rocky terrain at some point in their life. Whether it's help with estate or tax planning, or handling short-term liquidity issues, it's good to know you can rely on a professional to give you the advice you need to help preserve your financial peace of mind.
Risk Control
A good financial professional knows that returns can be maximized and risk can be managed through appropriate asset allocation. Diversification is the most widely accepted method of helping to reduce overall portfolio risk. Your financial professional can explain more about the benefits of multiple levels of diversification.
Realistic Performance Goals
In most cases, consistent, above-average returns is a goal that many people use to meet their long-term investment strategies. Your financial professional can talk in real terms about the returns needed to meet your goals. Often, investors find they don't need to aim for the highest returns, thus avoiding taking on a lot of additional risk.
Regular Investing
Most financial professionals suggest that you invest regularly, perhaps monthly, to help you reach your goal. This offers two advantages: it helps you develop a habit of saving and allows you to take advantage of an investment method known as dollar-cost averaging. However, systematic investing does not ensure a profit, nor does it protect against loss in declining markets. Dollar-cost averaging involves continuous investment regardless of fluctuating prices, and investors may need to consider their ability to continue investing in volatile markets. Your financial professional can give you more information on the potential advantages of dollar-cost averaging.
Keeping Your Emotions in Check
A financial professional will help you resist the temptation to change your investment approach based on an emotional response to market changes. Research on investor behavior indicates that new money often flows into a mutual fund just after a period of exceptional performance, and that those investors typically lose money, or at least fail to experience the type of outstanding performance the fund has recently reported.*
The problem is timing. Stock funds with sizzling results catch the media's attention, and many investors get caught up in the hype and rush in with their money. Unfortunately, these followers of the "fund du jour" generally end up shrinking their net worth.
*Source: Dalbar, Quantitative Analysis of Investor Behavior, 1995. Russell Research Commentary "Past Performance Is No Guarantee Of Past Results," 1997.
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