The world is full of investment opportunities and when you start looking for places to grow your savings, it can quickly get overwhelming.
Not knowing what to do stops many people from making any return on their savings and this ‘decision inertia’ runs the risk of you missing out on huge returns over the course of a lifetime.
Traditionally, there was a solution to the dizzyingly array of investment choice: An investment advisor. A investment advisor can help you to make the best investment choice and make sure you are considering the implications of investing like taxes, risk, and asset allocation.
However, you probably don’t need one.
Here’s 4 and a half reasons why:
1) A Simple Life
An investment advisor can save you thousands of pounds if you have a complex investment portfolio already or have tens of thousands of pounds lying around.
Hands up if you do?
Of course, investment advisors have the potential to provide a great service as they work with money for a living:
- They know the tax code
- They know the ‘tricks of the trade’
- Most importantly they can suggest a good asset allocation (the amount of money you put in each investment) personalised for you: your needs and attitude to risk.
However, as 20 and 30 somethings more of us don’t have or need such a complicated portfolio and can work out our attitude to risk and a good asset allocation from free resources available on the Internet.
If you think that you need an investment advisor it’s likely to be just another barrier in your mind stopping you from making a start.
2) The Information Revolution
As children of the information age, we have more access to information than any other generation, including information about investing and money management. Books are great sources of information but the real breakthrough has been in the explosion of easy to read, free content available online.
In the 21st century if you have an internet connection it’s incredibly easy to learn about anything, including investing. But where to start?
If you wanted to learn more about investing in an easy to understanding way you can’t go far wrong by having a browse through some popular personal finance blogs. I’ve found them invaluable over the years as they give you new perspectives and snap-shots of what real people are doing today with their money. Click the Wisebread logo to view any of the top personal finance blogs to continue enjoying financial blog goodness:
Despite the disclaimers on blogs (as we can’t tailor advice to specific circumstances nor do most writers have financial qualifications…yet) there’s still a great deal of information available for all of us to make more informed choices.
3) Investment Advice is mostly expensive or not impartial
If you have a complex or highly specific iinvestment issue, then an investment advisor can be a huge help, but if you are just starting out with investing then using a financial advisor can be unnecessarily expensive, or worse: biased.
Investment advisors can make a living either by a fee you pay directly for their time, or by getting a cut from the companies they get you to invest with (or a combination of the two payment methods). When advisors get paid by investment companies this is known as an affiliate fee or a commission.
The accepted wisdom is you should always choose a ‘fee-based’ advisor because they can be completely honest with you –they will recommend what is best for you because there is no financial incentive to suggest something else. However if you are like most 20 or 30 somethings, you are likely to not have much to invest at this stage, so an advisor fee could cost you several months of investing money that you’ll never see again.
As you can learn so much more about investing (for free online and in books from your library) than at any other point in history, the free content already available really is all you need to get started.
Save your financial advice money for when you have a complex financial issue that needs to be resolved once you’ve built up a few hundred thousand pounds worth of wealth!
4) Take Control -You don’t need a baby sitter for your money
One situation where it is worthwhile to have a financial advisor is when you need someone to baby-sit your money. If you’re nervous about investing you may feel comforted to know that an ‘expert’ looking out for you and can hold your hand through the process.
However, this should not be you!
Investing isn’t as daunting as you may think and whilst having a baby-sitter might stop you panicking, you should realise that the cost can be enormous. When you first start investing you may feel a little scared –naturally heading out into the unknown isn’t easy, but I assure you that you will quickly feel empowered that you are taking the future into your own hands and beginning a journey to grow your pennies. And such a journey will have a profound effect on the choices available to you for the rest of your life.
The easiest way to get prepared and learn about investing is of course to simply keep reading Magical Penny.
I’ve been reading books, blogs and research papers on the subject for over four years and actually investing for almost three so I’ve been through the process and started the blog for this very reason: to empower people to begin investing, cheaply and simply, and most importantly on their own terms.
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