Nearly six in 10 high-net-worth investors work with a financial professional. They seek guidance on portfolio allocation and asset allocation, market analysis, changes in tax policy, and more. Yet many advisors focus on attempting to be incomparable, offering excellent service at a higher-than-average cost to substantiate their value.
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Investing Strategy
Investing is a great way to reach long-term goals like purchasing a home, saving for a child’s education, or preparing for retirement. Whether you have a large amount of money to put aside or simply a few thousand dollars, investing can help you grow your wealth.
Choosing the right investment strategy with the assistance of financial experts like Fred Baerenz is crucial to creating a well-rounded portfolio and minimizing risk without sacrificing too much potential return. For example, putting all your money in one stock is a high-risk strategy that can create a significant loss if the company goes bankrupt.
Other strategies focus on buying low-cost investments expected to grow in value, like a discounted property in a growing neighborhood or stocks of companies with solid business fundamentals.
However, the investment returns of different asset categories move up and down in response to different market conditions. Changing your strategy can come at a cost in terms of taxes or the need to sell assets that may have already grown in value.
Timing
We’ve all heard the expression “timing is everything,” – meaning that the outcome of an event often depends on when it occurs. It’s essential for financial decisions, as well.
Investment strategies may need to be adjusted as personal circ*mstances or market conditions change. This is another area where a professional advisor like Frederick Baerenz can be valuable.
When evaluating an advisor, it is also helpful to understand their fee arrangements. Ask whether they are fee- or commission-based advisors, and make sure they disclose how much they will earn from each transaction.
You should also find out if they have an ethical obligation to act in your best interest or just their own and how they are held accountable for their recommendations. It’s also a good idea to confirm their credentials and licensing information and whether they are regulated by the SEC or other agencies.
Risk Management
Once goals are established, a financial professional can work with you to develop an investment plan that will help achieve those goals. This includes developing an asset allocation based on your current situation, risk tolerance, and time horizon.
Risk management includes identifying, evaluating, and controlling threats to an organization’s financial capital and earnings. These threats could stem from various sources, such as financial uncertainty, legal liabilities, strategic management errors, and accidents.
When identifying risks, it is essential to consider an organization’s overall goals and the plans and activities to meet them. Risk teams should also collaborate with critical stakeholders and process owners to gain insight into the risks they foresee. Risks should be documented, often through a risk register or other formal documentation.
Sometimes, avoiding or mitigating a risk isn’t possible. In these cases, accepting the risk might be a better strategy. Another possibility is shifting the risk through a contractual arrangement such as insurance, which shifts a business’s exposure from its balance sheet to an outside third party.
Taxes
Taxes are required payments that individuals and businesses make to local, state, and federal governments. They transfer resources from private to public hands and allow governments to provide services like defense, highways, police, and a justice system that citizens cannot quickly or efficiently provide.
Tax policy is important because it determines how much of a country’s income is devoted to government spending and how much is available for investments.
The optimal level of taxes can be calculated using several different models, and it is essential to consider both efficiency and equity concerns when designing a tax system.
The right financial professional can help you limit your exposure to taxes as you work toward your investment goals. They can evaluate your withholdings and suggest necessary changes to ensure you get the most money on each paycheck.
They can also help you develop a comprehensive plan that includes strategies for tax-efficient investing, estate and philanthropic planning, and preparing for long-term health care needs.
