BY FAZAAD BACCHUS
Wealth doesn’t just happen by chance. It takes many factors to create it and no one better than a financial advisor can help you create it. A recent report from the Investment Funds Institute of Canada highlights that investors who work with a Financial Advisor have three times the net worth and four times the investable assets than those who do not. One may win the lottery, come into money or could have been left an inheritance and for sure that will constitute wealth, but have you ever noticed over the years that persons who inherit sudden wealth either by winning a lottery or an inheritance are usually broke five years later?
What causes this is a pure function of a lack of proper advice and obviously proper financial planning. While the odds of winning the lottery are extremely difficult, attaining wealth is not so difficult. So let’s talk about how you can create wealth. In the last printed issue I suggested that you stay true to your financial goals and that you should start by saving at least 5% of your income with the ideal being around 10%.
Now further to this, let’s create a saving objective. There is no fun in saving money unless it’s attached to a goal. For some it could be a down payment on a home, their children’s education or very importantly a proper retirement. Whatever the savings goal, there are four things to always be on the lookout for. Safety of your capital, amount to be invested, your investment returns and your time horizons.
When using a financial advisor, the first service he will provide is to determine your objectives and goals. No doubt some objectives may be unrealistic, so a good financial advisor will also guide you on alternate plans in case they don’t materialize. However, a client needs to be very honest and upfront with the advisor, be very clear with your financial situation. A half hearted plan and effort will just not suffice.
A good advisor always considers your risk profile. Some people are little fazed when the market falls, while some can fall into severe depression. Knowing your risk tolerance allows the advisor to place your investments where you can sleep at night.
Choosing the right investment can be quite a daunting task with so many mutual funds out there. Which is really the best one for me? A common mistake clients make is that they buy the one that’s doing well and hope it continues to do so or hope that it doesn’t fall. That is not a good strategy; your advisor should be researching the market and looking for ways to grow your money with the best possible returns given your risk tolerance.
It’s also a fact that many persons prefer to do their own investing, however at what point in time do you think you should turn things over to a professional? It’s the same as going to a doctor. You can read all about medicine, but when the time comes you should not self medicate. Even doctors know that if they are ill they need the services of another doctor, a qualified professional.
Using an advisor creates discipline which leads to more frequent contributions and every contribution adds up, ensuring you reach your financial goals. Staying focused on your savings goals and choosing the right investments will overtime allow you to create absolute wealth. It’s important that you also be involved in the financial planning discussions in great detail so that you may understand what the underlying investments are and what changes are happening. Start your planning today. Find a financial advisor and start building wealth.