At the end of the day, the person who has the most to gain or lose from your investment nest egg is you- not a financial adviser or any other person offering investment help.
Well, a study was done that compared the investment returns of those who used investment advisers and those who didn’t, and the results were very interesting. On just the surface view and analysis, those who had a financial adviser manage their assets appeared to have superior performance and lower risk compared to those without an adviser. However it was found that financial advisers are more often paired with older, richer clients rather than younger, less affluent ones. Taking these differences into account results in a different outcome. From the study:
How to Invest
As a start the easiest thing to do is invest in the index funds like those that follow the S&P 500 or NASDAQ. Your investing will then directly follow the market indexes for better or worse, with no financial adviser needed. From a long term perspective, the market has been historically bullish so it works out. That would get you started as you learn more about the market and investing. The best time to use a financial adviser is when you are savvy enough about investing to know what you want to do, but don’t have the time to do it, so you can give your financial ideas to the adviser and let them execute it for you.
How to Spot a Good Financial Adviser
How can you tell if a financial adviser is good or not? You can ask to see their track record of performance. As a quick check, you can ask them how they fared in the market from 2007 – now. We have seen some turbulent times in the market which serves as a great litmus of the true skill set of the financial adviser in question. Compare their performance to that of the market index funds. If they can’t beat the index fund performance, then they aren’t adding any value with their management skills, and should be avoided.