How Financial Advice Can Help Your Investment Portfolio Saving money is challenging. There is an abundance of products, vehicles, and instruments that you can utilize to save, protect, grow, and invest your money, but maintaining a balance between them can be highly puzzling for the average saver. Financial literacy is crucial for steadiness, but the UK sits at the middle of the OECD league table for financial literacy .
If you are pondering over the idea of using your savings and investments, you might be rescued by consulting a financial advisor – but how exactly can they help?
Setting Goals Financial advisors can help in various ways, one of the most effective is the setting of goals. Having an independent advisor go through your current financial situation can be life-saving, and can help discover some key goals for you in the short, medium, and long term.
As an example, you might simply want to grow your savings in an efficient manner , in order to reach a specific milestone like the purchase of a home. Alternatively, you might be looking for a way to actively grow income for your retirement. Whatever the end goal, an advisor can help chart the path to it. He will make wise decisions that will allow you to invest your money economically along with other benefits.
SMART is an acronym that was first coined by George T. Doran in the 1981 November issue of Management Review. It stands for Specific, Measurable, Achievable, Realistic, and Time-bound. A financial advisor is known to have a fully-fledged knowledge of this fact and ensures financial gains in the future.
Assessing Risk Typically, financial advisors navigate the complex world of stocks, shares, and assets. These are the most fruitful ways to grow a given sum of money, but not unilaterally. Investing in a business’ shares, or in a commodity, is a preternaturally risky endeavor, with prices fluctuating in accordance with incalculable variables.
However, financial advisors understand risk well – and have the tools to assess risk with a degree of accuracy. As such, financial advisors are well-suited to the task of assessing risk before money is placed with a given business or commodity. Based on examining your income, purpose, and the current market, they choose the right investments.
Building a Portfolio If you are serious about investing money, you will know that placing all your money in one investment vehicle is generally considered a bad idea. A diverse portfolio is a stable portfolio, and financial advisors are crucial to navigating the balance well.
Managing a portfolio requires planning, executing, and monitoring your investments such as stocks, bonds, and mutual funds. Diverse portfolios combine high-risk and low-risk investments , protecting the majority of the portfolio’s value while allowing room for riskier investments to grow wildly.
Behavioural Coaching Finally, there are specific sub-sets of financial advisors that specialize in something called ‘behavioral finance’. This describes the decisions we make and habits we form with regard to our finances, and the impact of irrational factors such as feelings and self-control on said decisions.
Stock markets are difficult to read, and the future is impossible to predict; rather than focusing on achieving the best market results, behavioral finance advisors would focus on the shrewdest way to approach the market. This might mean re-iterating the importance of objectivity in financial decisions or touching on the emotionality of impulse decision-making.
Seeking the help of a third-party financial advisor is by no means a necessity; this is especially true if you are content with the low-risk, low-reward earnings potential of a global index fund and a stocks and shares ISA. However, for the more committed investor – or the individual with a not-insignificant amount of money to invest – they can be invaluable for both protecting your money and growing it in the most efficient possible way.One of the research papers published by Vanguard listed the benefits that an advisor provides through financial planning, discipline, and guidance. They called this putting a value on your value, which adds up to 3% in net returns for clients. So look out for a financial advisor who will provide you with the necessary motivation and will look out for your investment.
