The kind of financial advisor you need – A Tip from The Skilled Investor
Good or bad, financial advisors are expensive. If you need a financial advisor’s help and you carefully select a good financial advisor, the value of the personal finance and investment advice that you receive might easily repay the advisor cost. However, bad financial advisors can cost you dearly, though both high financial expenses and poor investment strategies. How can you tell the difference between a good and bad advisor?
From The Skilled Investor’s scientifically-based point of view, it is relatively easy. Look for an advisor who will encourage you to:
to invest in very broadly diversified (own the full, global market) securities that are the among the lowest cost available to steer toward passively-managed low cost funds and away from owning individual securities to resist every temptation to chase superior past performance and always stay passively invested to determine your risk tolerance and keep you at or below that level through your asset allocation to plan your cash needs several years out and keep you fully invested through calm and stormy markets to save, save, save until you have built up significant asset buffers that give you the choice of easing back to spend to meet needs over wants and to indulge wants when you are well on track in building up the assets you require to meet your family’s long-term needs
If you can find a financial advisor like this, then you are very lucky. Knowledgeable and competent financial advisors with efficient services can help you to formulate comprehensive financial plans, keep you on track toward your financial goals, and gently steer you away from foolish financial decisions. (See these articles on Selecting an Advisor and Regulation of Advisors)
If you are proactive and careful, learn what you are going, follow the general strategies above, find your own low cost no-load funds, and avoid stupid, emotionally driven actions, you can manage your money by yourself without an advisor. Many millions of people do. Unfortunately, the record of many other do-it-yourself investors is not encouraging, because they do not research what really works and does not work. Millions of individual investors do not diversify, follow uninformed instincts, futilely chase past performance, pay high fees for active management, jump in and out of the markets, do not save anywhere near enough, and do not plan ahead. These [...]