Michael Callahan
Now that there’s an app for everything, you can change your investment portfolio in about as much time as it takes to order a pizza. It’s never been easier to invest alone—which means it’s also never been easier to make investing mistakes. Apps, online tools and other avenues that allow you to invest alone don’t take your full financial reality into consideration when making recommendations about where and when to move your money. Working with a financial planner on your investment strategy allows you to build a portfolio that’s perfectly tailored to your needs, and avoid a lot of the (expensive) challenges that come with investing alone. These are just some of the ways that working with a financial planner can be more lucrative and efficient than making investment decisions on your own.
Your financial planner can help you maximize your investments.
Amateur investors don’t know what they don’t know. Sometimes a new investor will download an app, make some choices and start to see gains. Feeling lucky, or feeling confident in their innate investment abilities, they start taking bigger risks without paying attention to what’s happening in the market. Suddenly they’re losing money, and they have no idea what to do. Or, a young worker who’s new to investing alone might be so cautious about taking big risks that they tie up all their money in stable, low-yield bonds and don’t get the kinds of returns they could be getting elsewhere.
These are the kinds of mistakes that can have a real, lasting impact on your retirement timeline or your family’s budget. Investing without a clear, future-focused strategy leaves you unprepared for changes in the market and may ultimately mean leaving money on the table. Your financial planner can help you weigh your options and identify appropriate risks so your money grows as quickly as possible.
Your financial planner looks at your investment portfolio as part of your overall financial picture.
Investments don’t happen in a vacuum. The choices you make around investing and risk will affect the rest of your financial plans, and have to be informed by those big-picture plans. This is one of the ways where apps and online investment tools can let investors down. How much can you afford to invest? If you want to start investing more money, where’s the best place to pull that extra cash from your budget? What level of risk can you safely take on, considering your specific financial picture and retirement savings? Having these discussions with your financial planner is a critical part of shaping an investment strategy that keeps you on track with your financial goals.
Your financial planner can help you consider tax planning and estate planning as part of your investment strategy.
The ultimate goal with investing isn’t simply to maximize your portfolio: It’s to maximize your after-tax income. Tax planning has to be part of your investment strategy so you aren’t surprised by any unexpected tax consequences of your decisions. From choosing which investments to place in which types of accounts, to properly structuring your distributions in retirement, to choosing the right time to rebalance the portfolio — there are a number of ways to improve your rate of return through proper tax planning. A financial planner who’s already familiar with your financial picture and tax burdens can be a tremendous asset in devising a tax-advantaged investment strategy.
Estate planning is also relevant when you’re building or changing your portfolio. Some of your investments, or the income you bring in from investments, may someday be passed down to your loved ones. Your financial planner can help you think about ways to minimize their tax burdens through estate planning.
Investing alone takes more time.
Managing your own investments can sometimes be like taking on a part-time job. Even when you’re using an app or website that claims to make investing quick and easy, you’re going to want to do your own research and watch the markets. When you’re the only one watching over your money and making all the decisions about where and when to move it, you’re probably going to need to carve out time every week that’s dedicated to monitoring your investments and catching up on financial news. Leaning on a financial planner’s guidance frees up a lot of that research time and lets you quickly identify investment options that align with your risk tolerance and goals.
Working with a financial planner lightens your mental load.
Making savvy investments isn’t just about growing your wealth so you can afford luxury vacations – it’s also about protecting your financial safety net. Taking a big risk that decimates your portfolio puts your overall financial future in danger. Investing alone can be anxiety inducing. You don’t want to lie awake at night and worry that an investment decision you’ve made is going to require you to dip into your retirement savings, take Social Security early or even sell your property. It’s easier to focus on other things when you’re not constantly second-guessing your decisions, or wondering whether you missed a lucrative opportunity.
Sachetta Callahan’s financial planners work with clients at all points on their investment journey. From young professionals buying their very first stocks, to retirees who want to tweak their portfolios, we’re here to help clients make sound financial decisions with confidence. Have questions about investing with a financial planner’s help? Contact me today!
Michael J Callahan, CPA, CFP®, MST, Partner, Director- Wealth Management Michael is a Certified Financial Planner™ practitioner, Certified Public Accountant, and holds a Master’s Degree in Taxation from Bentley University. Mike has been involved in personal financial planning, as well as both business and individual taxation for more than 15 years.