Investment Advisor Insights: Expert Tips for Building a Strong Portfolio

Last Updated:
October 12, 2023
Kay Nicole

Investment Advisor Insights

Many investment advisors and financial planners guide investment portfolios. They can help you with your retirement plans, asset allocation, market analysis and more. These professionals may charge fees based on assets managed or a combination of flat fees, fixed fees and hourly rates. They also earn commissions on their sales of financial products like insurance.

Know Your Fees

One of the biggest factors determining an investment portfolio's performance is the fees paid. Many investors need to fully understand the various fees they may be paying or how those charges can impact their returns. Transaction fees and recurring costs are the two types of fees that can be categorized. Every time you buy or sell an investment, transaction costs are levied. Ongoing costs, such as maintenance fees or account management charges, are set regularly. Many investment professionals also charge an advisory fee, usually a percentage of the overall assets they manage for you. It can be a great option for investors looking for help managing their entire financial picture, not just their investment portfolio. When understanding fees, the best way to learn is to ask your registered investment adviser. They should be able to explain their fee structure and provide you with information about your transaction history and investment performance. You should also check your statement, confirmations and product documents to ensure you receive accurate information.

Keep It Simple

A portfolio should be simple to understand and keep track of. Keeping your investments to a minimum helps you manage volatility and stay the course through market downturns. It's crucial to take the time to evaluate your financial condition and decide your risk tolerance to create a solid investing portfolio. With the help of investors like Frederick Baerenz, you can create a plan that fits your goals and expectations. Investing in an individual stock or mutual fund is one option, but you may also choose to invest in a diversified portfolio of low-cost exchange-traded funds (ETFs). In either case, professionals like Fred Baerenz can explain how these investments work together and what they are expected to achieve for you over time. Many investment advisors also offer additional guidance on other aspects of your finances, such as budgeting, taxes or retirement planning. In this case, they often carry the CERTIFIED FINANCIAL PLANNERTM or CFP® certification mark. FINRA rules require that these advisors disclose any conflicts of interest.

Don't Overdo It

Just like a resume, your investment portfolio should tell a career-focused story. Include the most relevant work and projects, and keep the rest to a minimum. Your investment advisor will help you build a strong portfolio that fits your goals, risk tolerance and time horizon. An investment portfolio should be diversified across asset classes, such as stocks, bonds and commodities. Each asset class offers a different potential for growth, income, relative stability or inflation protection. Investment advisors can also have other designations to provide more holistic financial guidance, such as certified financial planner (CFP) or chartered financial analyst (CFA). Some investment advisors are fee-only, meaning they only charge a flat or asset-based rate for their services. Others are commission-based and receive compensation from selling products like insurance policies in addition to their standard fees. Both types of investment advisors are registered with the SEC and must abide by fiduciary duties. Still, fee-only advisors have an extra layer of transparency that can help you understand how they make money.

Find a Strategy That Works for You

You're an investment advisor working at a financial services firm. One of your clients is John, a 45-year-old professional with some savings in his bank account but has yet to make significant investments. He's interested in learning more about investing and wants to make wise choices for his future. First, you and your client set some goals. It includes why he's interested in investing (his "time horizon"), such as saving for retirement or his child's college tuition. Then, you establish your asset allocation based on those goals and risk tolerance. You might invest your client's money in mutual funds, exchange-traded funds, stocks and bonds. These assets are known as your portfolio. Some investment advisers get paid a flat fee, while others charge a percentage of the money they manage on your behalf. Understanding how these fees work before hiring an investment advisor is important.

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