HomeInvestmentWhy Do You Need An Investment Advisor And How To Choose One?
Why Do You Need An Investment Advisor And How To Choose One?
June 17, 2021
Investment advisors are professional participants in the securities market who are entitled to advise private investors and are required to be responsible for this advice.
Investment advisors help a person decide which securities to buy, in what quantity, when, and for how long. They predict the likely return on an investment and warn of potential risks.
It is important to distinguish between investment advisors and financial advisors. Financial consultants are contacted on issues related to personal budget management.
For example, they will help you draw up a family’s financial plan, find the most profitable bank deposit or loan, choose an investment life insurance policy or a retirement plan in order to save up for an additional pension. But they are not entitled to make individual investment recommendations.
Investment advisors can also advise you on various financial issues, but by law they are only responsible for recommendations that relate to investments in securities – stocks, bonds, unit investment funds, as well as derivative financial instruments- futures and options. So, before you follow their other advice, it is worth carefully assessing the consequences.
I have never bought securities and I don’t have much savings. Does it make sense to contact an investment advisor?
An investment consultant is a specialist in the selection and analysis of types of investments, drawing up a client’s investment strategy.
An individual and a legal entity can act as a consultant. Investment consultants provide services in the examination of investment projects and ideas, in terms of circulation, purchase and sale of securities on the stock markets.
The advisor will help both an experienced and a novice investor choose suitable financial instruments:
If you have no securities and have never tried to invest in anything, but would like to, he will offer you tools for beginners – simple and not too risky.
For example, government and corporate bonds with high ratings. The profitability on them, as a rule, is not very high, but it is known in advance.
If you have already invested part of your money in securities and want to try something new, the advisor will evaluate your portfolio, suggest how to balance it in terms of risk and return, and add new instruments to it if necessary.
For example, he will advise which stocks, mutual funds and ETFs you can buy. The return on such investments cannot be predicted, but it is often higher than on bonds.
If you consider yourself a seasoned investor, the best investment services companies may recommend more sophisticated tools for you than for novice investors. For example, structured products, which may include derivative financial instruments – options and futures.
With them, you are very much at risk of losing money, but at the same time there is a chance to make a profit even in conditions when other securities are falling.
The most important thing is to choose top investment services companies you can trust, and remember that only free money is suitable for investments – that is, those that you are willing to risk. And before thinking about investing in securities, it is important to create a financial safety cushion.