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Understanding the Added Value of an Investment Advisor in Your Financial Journey



Investment Advisor in Your Financial Journey

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Investment advisors can add enormous value to your financial journey. Research shows they can generate up to 3% net returns for investors. When selecting an advisor, make sure to understand the fee structure. Find out if they charge a flat rate or based on the assets maintained.

Developing a Financial Plan

Whether you work with a human advisor, a robo-advisor, or neither, developing a financial plan can assist you in achieving your objectives. Whether the goal is paying off debt, saving for retirement or purchasing a home, an investment advisor can help you figure out how much money you need to reach your short-term and long-term goals. The process begins with a look at your financial standing, including sources of income and expenses. For example, list your investments and their current balances and growth trajectories. You also might document your spending, including mandatory payments such as rent and car payments and additional categories such as entertainment, subscriptions and miscellaneous expenses. An advisor like Fred Baerenz can help you create a strategy that supports your goals, considering factors such as how long you’ll need to save, the timeline for achieving those goals and your risk tolerance.

Identifying Financial Goals

Reaching financial goals requires planning, and that is where investment advisers can help. First, they’ll review your assets, liabilities, income and expenses in a questionnaire or interview. They’ll also work with you to identify your short-term, mid-term and long-term financial goals. These objectives must be precise, quantifiable, doable, timely, and relevant. For example, a short-term goal could be taking a vacation or buying a new refrigerator, while a mid-term plan might pay off your credit card debts within two years. A long-term goal might be saving enough money to live comfortably in retirement. Then, an advisor such as Frederick Baerenz can guide you in achieving your goals by developing a budget that prioritizes your needs, implementing debt repayment strategies and designing a savings plan. They can also help you build your investment strategy, determine the amount of risk to take and offer advice on incorporating charitable giving into your project. They may also address tax considerations, such as how to maximize deductions for IRA contributions.

Developing an Investment Strategy

Getting clear on financial goals and time frames is the first step in creating an investment strategy. For example, defining goals as long-term (10 years or more), mid-term (3 to 10 years) and short-term (less than three years) will help your advisor determine the appropriate time horizon for investment project retirement needs and establish your risk tolerance. When selecting an advisor, it’s important to consider their qualifications and ensure they have your best interest in mind. You can check their credentials using resources. A financial advisor can also help you avoid common investment mistakes, which often include attempting to time the market, needing more portfolio diversification and failing to address tax implications. They can also help you develop a tax-efficient portfolio by placing assets in the most appropriate accounts based on their tax treatment, such as taxable, registered and TFSA accounts.

Monitoring Your Investments

While it is impossible to predict stock market returns, an investment advisor can help you develop a plan and build a diversified portfolio that aligns with your risk tolerance and time horizon. They can work with your tax professionals to ensure your assets are optimally placed.

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