An investment advisor can be a substantial ROI compass when making financial decisions. This compass can help you navigate the sea of investments, balancing your goals with an acceptable level of risk.
Diversification is critical to building a healthy stock portfolio. However, many people need to diversify more and make costly mistakes.
Investing for Growth
A financial advisor can help you understand your goals and risk tolerance and recommend a portfolio with solutions to fund your biggest dreams. They can also guide you through finding and using investments that can increase your returns in all market conditions.
Growth investing involves looking for companies expected to grow faster than the industry average. These companies often don’t pay dividends because they reinvest all of their profits into expansion, which increases the value of the company’s stock. Growth stocks can be found in all stock market sectors, but they are most common in areas like technology and healthcare.
This approach to investing is more risky than some other strategies. This means keeping your eye on your long-term goals and staying focused on maximizing your returns with every trade you make is essential. Avoid jumping from one strategy to the next just because it looks better in any given year — that’s called chasing returns, and it can be a recipe for underperformance over time.
Investing for Income
The primary goal of many investors is to have a reliable stream of income that will support their lifestyle throughout retirement or when they need cash. This can be accomplished by a thoughtfully created investment portfolio aligned with your financial objectives and risk tolerance.
Income investing strategies generally include a mix of dividend-paying stocks, interest-bearing bonds, mutual funds, and real estate investments. However, the exact approach will vary based on your needs and time horizon. For instance, an Investment advisor Frederick Baerenz, focuses on securities and can help you create and manage a diversified portfolio designed to help you meet your goals. Some advisors also have certifications like Certified Financial Planner (CFP) or chartered financial analyst (CFA), enabling them to provide comprehensive financial guidance such as budgeting, tax consulting, and retirement planning. They may also offer additional services such as wealth management or estate planning.
Investing for Taxes
An investment advisor guides investments in exchange for a fee. This includes people who work as financial planners, money managers, and even some teachers. However, the Securities and Exchange Commission defines it as anyone who makes recommendations or issues research on individual stocks. They must also be registered as an investment adviser or registered investment adviser representative, which requires meeting specific qualifications.
A professional such as the Founder of AOG Wealth Management Fred Baerenz, can help you determine how much risk to take and how long you’re willing to invest. They’ll also be able to set up a diversified portfolio that considers your goals, risk tolerance, and tax sensitivity.
An investment advisor can help you find ways to minimize your taxes on returns by using strategies like tax-loss harvesting. But it’s important to understand that how an advisor makes money creates potential conflicts of interest that can affect their advice. Find out more by checking an advisor’s disclosures.
Investing for Retirement
When you get closer to retirement, your focus will shift from growth to preservation. You’ll want to reduce the risk of outliving your assets, which may mean reducing your exposure to stocks and increasing your exposure to bonds.
Start saving as soon as possible, ideally setting aside 15% of your salary (including any company matches). Aim for a consistent cadence of savings. Historically, the long-term gains from compounding have been more substantial for those who save regularly over time.
Consider using a target-date fund in your workplace retirement account or a robo-advisor to help you automate the process and give you a hands-off approach to retirement investing. Some advisors charge a flat fee to help you with strategies that include budgeting, estate planning, tax-smart withdrawals, and IRA conversions. Other advisors are compensated by commissions on the investments they sell you. A reputable advisor should always disclose how they are paid to you. They should also have a track record of success.