Investing can be a complex affair, especially if you are not an expert in the field. However with hundreds of thousands of people making their first investments each year, it is no longer a field reserved for the seasoned professionals. However investments are a very risky business and could potentially be even riskier without a full understanding of the process and its implications. This is why many people choose to consult the expert knowledge of an independent investment advisor or broker in the initial stages.
In this article, we will explore three common myths regarding the service provided by investment advisors, offering you accurate and balanced information on the matter.
1. The advisor takes control of money and all decisions
A good independent investment advisor will seek to gain a good understanding of your financial situation and also your financial goals. They are likely to consider the four Ws in order to do this: why you are looking to invest, what you are hoping to do with the money, where you are looking to invest (if you have any idea) and also when you would like/hope to use the money.
By gathering these facts and gaining a full picture, they will be able to advise and make recommendations accordingly. An independent investment advisor is not there to take control of your money but rather to use their expertise to offer guidance to help you invest in a way which best suits your circumstances and aspirations. They will also discuss the risk factor and they are likely to try and ascertain your tolerance for risk and expected rate of return in order to be able to make relevant recommendations.
The money will remain yours and any decisions will also be your own however if you are unfamiliar with investing then seeking assistance from an independent investment advisor could help to offer guidance on a number of factors. They can advise you on what to invest in, whether to buy stocks or funds, investing for income or retirement, potential rates of return and also taxable costs of your investments.
2. Only beginners need investment advice
In actual fact, many people with existing investments turn to independent investment advisors when they are considering how to move forward. With bigger investments come greater risks therefore people often want to be as well-advised as possible.
Also investors who have been lucky enough to make profits on their first investments often find themselves wanting to grow it further and therefore look to invest in different ways which an investment advisor could offer guidance on.
An investment advisor is likely to analyse your existing investments and discuss your future investment aspirations in order to help make a plan for going forward.
3. If I use an investment advisor, I counteract some of the risk of investing
Sadly this is not true. Even the most seasoned experts in the field could not deny that investing carries great amount of risks and often people who have made the greatest profits have taken serious risks along the way. An independent investment advisor could help on finding the right investment suited to your attitude to risk, but they cannot the risk of any particular investment away.
Investments can be a good way of growing your money but profit is not guaranteed and is often based on things that are out of your control such as stock market movements. Therefore you should always bear in mind that you could lose all the money that you invest and be left to deal with the consequences.
John T Hughes writes for Share Dealing Account, a leading online source of information on share dealing accounts in the UK.