The Value of Advice

November 9, 2011

Investing is a long term process. It works best when you have a goal in mind and a professional by your side to walk you through it. Investing may feel like a rollercoaster when you go it alone, but working with a financial professional who understands the process makes it a different experience.

Your advisor should be asking you a series of questions to make sure that you both have a clear picture of what you want to accomplish. This would include both short term and long term goals, with checkpoints along the way to monitor your progress. The questions that will help this process can include variations of the following:

What the money will be used for? When you will need the money? Will you be dependant on it at a future date, such as during retirement? Other questions would be: How comfortable you are with loss? (They say that the pain of loss is much worse than the pleasure of a gain). Are there other people depending on it as well? The decisions are also best made in context of your portfolio as a whole, as well as your net worth.

Your advisor should also talk to you about how you would react to hypothetical situations like events in the news or an untimely loss. Risk and reward do go hand in hand, but it’s never good if your risk makes it hard to sleep at night. A calculated risk, based on solid information, is a lot less risky than making an uninformed decision.

Your progress towards achieving your goals can be more important to define and measure than the actual rate of return on your portfolio. By determining clear goals and checkpoints to see your progress can take much of the day to day stress of the market out of your investment experience.

Even the most solid company with stellar management will have some years that are better than others. Sometimes the movements in the market has nothing to do with the companies themselves, but are determined by the broader economic landscape, or even by major fund manager buying or selling large volumes of a particular holding. Often, the perspective that helps during a particularly scary event is ‘this too shall pass’. Everything is temporary. Keep your goals in mind, review your progress regularly and you’ll be well on your way to long term success.

Did you like this? Share it:

Share this: