6 Questions To Ask Before Investing
Whether you’re a first-time investor or have been investing for many years, there are some basic questions you should always ask before you commit your hard earned money to an investment.
“If you treat Investing like a casino, it’s going to treat you like a gambler”
I had a sit down chat with a financial advisor/ wealth manager from a popular brokerage firm to answer some burning questions about investing. He has chosen to be anonymous in this blog post as we did not have enough time to get these questions and answers approved by his firm. However, he has guaranteed that all answers are truthful and based on general knowledge that anyone can google. He has also given me permission to give his contact information (via email) to my readers who are interested in learning more about investing.
Whether you’re a first-time investor or have been investing for many years, there are some basic questions you should always ask before you commit your hard earned money to an investment.
Q: What would you recommend as a starting point for a new investor?
A: For someone just starting out I would recommend they get an understanding of money and how it works. They have to determine their goals and their risk tolerance to market volatility. For example, certain types of bond funds can counterbalance market volatility so a starting point could be with bonds. Next, they have to choose an advisor that will put together a program designed to accomplish those goals .
Q: What is a recommended portfolio diversification for a beginner i.e percentage of stocks, bonds, mutual funds, etc?
A: This is a nuanced question and depends on the person’s time horizon. For example, if you’re a 25 year old planning to use the money as a down payment on a house in 5 years you may be better suited with a larger portfolio of bonds. The short answer is, if they are investing for the long term they are going to see more growth in blue chips and mutual funds that pay rising dividends over time. See JP Morgan’s Guide to The Markets - Time, Diversification and the Volatility of Returns.
What this shows is the 1, 5, 10 and 20 year return going all the way back to 1950 of a pure stock portfolio, a pure bond portfolio and a 50/50 mix. There isn’t a 5 year period in that 70 year history where there was a loss of money with a 50/50 mix. The worst that happened in any 20 year period is that you quadrupled your money. So, the suggestion would be if they’re investing for the long term invest in companies that provide basic necessities for our way of life and go with a 50/50 mix.
Q: What factors determine how you will invest someone’s money and do things like age and risk tolerance play a role?
A: There are many factors that play a role when it comes to someone investing. Things like:
How involved the person wants to be with their investments, i.e hands on versus hands off approach
Time horizon, not so much age. For example, if they are 70 years old but they are investing for their grandchildren’s legacy then age doesn’t matter.
Risk Tolerance
Tax considerations
IRA account versus Taxable brokerage account
Tax efficiency
Tax harvesting strategies
Q: How do you manage investment accounts for taxes?
A: Generally , there are 3 ways to invest money for taxes:
Taxable (pay as you go)
Tax deferred (Traditional IRA, Annuities)
Tax free (Roth IRA, Insurance products)
Q: What is your approach to financial planning?
A: I approach it as a process and it should be the same no matter who the individual works with
Get a feel for who they are, what they want to accomplish and why
Determine where they are coming from, their psychology about money, their values and their belief system around money and investing.
Ask them to quantify this as much as possible, in terms of their goals for the account, their psychology about risk
Tax needs
Risk tolerance
Are goals realistic
Am I a good fit for them and vice versa
Based on the above , I will then go through the courses of action and next steps. I will be transparent about:
The cost structure of each option
The degree of involvement each party needs to have for each option
Fees for services
I will then set up a periodic review for each account, i.e monthly, quarterly or annually.
Q: What are some important questions a client should ask their financial advisor before investing?
A: This is probably one of the most important questions.
How is the plan in the client’s best interest
Explain cost structure
Discuss any potential tax considerations
The various risks associated with the investment. Every investment has risks. There’s no such thing as a risk free investment
Describe in full the process of beginning this journey
If the advisor is unable to answer any of the above to the client’s satisfaction, they should exercise caution before proceeding.
If you would like to learn more about Investing or begin your own Investing journey with this advisor, feel free send me an email below and I will forward his info: CONTACT ME
This is Part IV of The Investing Series. Click here for Part III, Part II, and Part I.
Our investing series will continue in our next article on the topic of Real Estate Investing. Sign up below to receive the Investing Series directly to your inbox:
This article is for educational and informational purposes only. Contact a financial advisor before making any financial decision.
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5 Holiday Money-Saving Hacks
The holidays can be such an expensive period! It all starts in October around Halloween and it seems like every week thereafter you’re faced with a reason to spend money. From Halloween to Thanksgiving, Black Friday, Cyber Monday and then Christmas - it seems like you’re shelling out money left and right and it can swiftly ruin your budget
The holidays can be such an expensive period! It all starts in October around Halloween and it seems like every week thereafter you’re faced with a reason to spend money. From Halloween to Thanksgiving, Black Friday, Cyber Monday and then Christmas - it seems like you’re shelling out money left and right and it can swiftly ruin your budget. Here are some hacks to help you save money—and stress—this holiday season:
1. Set a budget
Consider everything you will need to spend money on, and not just gifts. Think of airline/train/bus tickets, gas money if you’re driving to family’s house, groceries for thanksgiving and christmas dinners, office parties, stocking stuffers, and anything else you typically spend money on over the holidays. Set a budget for all those items and STICK TO IT.
2. Use Cash.
After you have set your budget, take out cash. Do not use a credit card - this is to ensure you don’t over-spend and blow your budget.
3. Time Your Shopping
For thanksgiving, try to do your grocery shopping early so you can beat the rush and not be tempted to just grab things off the shelf. Turkey goes on major sale after Thanksgiving, so If you typically have it as part of your Christmas dinner, after Thanksgiving is a great time to shop for it. Other seasonal foods (like pumpkin pies) usually goes on sale too, so that is the best time to stock up and you can save money.
4. Don’t Buy Hype.
This will take some discipline - On Black Friday and Cyber Monday up until Christmas, retailers will offer lots of deals, discounts and sales. This is good, everyone loves a good deal! I Just be sure to compare prices, stay away from impulse purchases and STAY WITHIN YOUR BUDGET.
5. Watch The Weight.
Not yours - your luggage. If you’re flying over the holidays, weigh your bags before you leave. Airline fees can be upwards of $100 for overweight luggage, and some airlines charge for every checked bag! Know the rules of the airline before booking flights.
It’s the most wonderful time of the year! Don’t let shopping or travel be the cause of stress for the New Year. Just a little planning and discipline is all it takes for you to have a joyous and stress free holiday season.
How I Saved Over $4000 by switching Cell Phone Carriers
I did a complete financial overhaul about a year ago and discovered over $6000 of wasted money. A big chunk of that was in cell phones bills! This was a major money leak. Money leaks are those small expenses that you forget about soon after spending the money. They can wreak havoc on your budget.
One of the most challenging things when it comes to personal finance is finding and plugging money leaks. If you’ve seen my previous article on the topic you will find that it is quite easy to spend money without realizing. Money leaks are those small expenses that you forget about soon after spending the money. They can wreak havoc on your budget.
I did a complete financial overhaul about a year ago and discovered over $6000 of wasted money. A big chunk of that was in cell phones bills!
At the time, I was with one of the major cell phone providers carrying three lines of service. That is, three cell phones that weren’t fully paid for and three lines with unlimited talk, text and data. All this came at a cost of roughly $280/month. My fiancé had a similar situation where he was with another major cell phone provider carrying two lines of service. His monthly payments were around $240/month. Combined we were paying approximately $6240 in cell phone bills alone per year!
Nowadays, most cellphone plans don’t lock you into a contract. Gone are the days where you’re stuck with the same cellphone carrier for two years, unless you’re willing to pay hundreds of dollars in early termination fees. These days it’s easy to switch, and in many cases you can save yourself a lot of money by doing so.
We did some research and by switching providers we are currently saving roughly $4000/year! We combined my 3 lines with my fiancés 2 lines and went with a single carrier and currently pay $139/month for all 5 lines. That is roughly $1668 per year. This is saving us a whopping $4572 per year just on cell phone bills! Our services continued with the same great quality as before. I must mention however that in switching carriers, we had to purchase 3 new cell phones carrying an upfront cost of roughly $1600.
This was a simple adjustment which revealed an area that isn’t necessarily thought about when attempting to reduce expenses. If you are attempting to plug money leaks, definitely do not ignore this category as you might also find an opportunity for huge savings.
Also, If you’re hesitant to switch carriers because you get great coverage with your current carrier, there’s something you need to know. Smaller carriers such as Metro, Boost Mobile and Cricket, all run off of one of the major networks — AT&T, T-Mobile, Sprint or Verizon. So, if you’re with AT&T but sick of paying $120 per month for your plan, switch to Cricket Wireless and pay just $55 per month for unlimited data all on the same network. You’ll still get the same great coverage even though you’re no longer on an AT&T plan. You can find a list of carriers here.
*This is not a sponsored post, I do not get paid for the above views.
Best Money/Finance Podcasts for Young Professionals
On the path to becoming a professional regardless of the field you’re in, the focus has been getting to the place where we finally start our careers. Nobody taught us anything money or finance related. We lacked knowledge regarding taxes, refinancing/consolidating student loans, insurances, retirement, and investing.
On the path to becoming a professional regardless of the field you’re in, the focus has been getting to the place where we finally start our careers. We have been through many years of schooling - studying, passing classes, maintaining grades, matriculating, improving skills, applying for residencies and specialty programs. The remaining time was utilized to catch up on sleep, exercise and balance family and social life. Nobody taught us anything money or finance related. We lacked knowledge regarding taxes, refinancing/consolidating student loans, insurances, retirement, and investing.
I began listening to finance/money podcasts when I started my career as an Orthodontist. I went from having no income to a substantial salary that I wasn’t quite sure what to do with. I know I wanted to make smart financial decisions and improve my financial literacy but didn’t know what professionals to seek or even what types of questions to ask.
Undoubtedly my CPA and friends with experience have been invaluable but I wanted more. I wanted to learn all the financial terminology that I would often hear people speak of, words like index funds, mutual funds, compound interest, asset allocation, capital gains, amortization, differences between 401K, 403b, Roth and the list goes on. I wanted to learn more about financial independence, real estate investments, and passive income.
Books are usually my thing but podcasts have proven to be quite convenient and there have been a handful of podcasts that I listen to religiously and that have helped me tremendously over the last several months.
Afford Anything - This podcast is one of my favorites as Paula Pant is all about Financial Independence and is a big proponent to the FIRE movement. FIRE stands for Financial Independence Retire Early. She’s 34, retired, financially independent, has zero debt and makes a living through real estate investing, blogging and podcasting. She introduces listeners to different ways to build passive income and rid yourself of a 9-to-5 job.
Stacking Benjamins - I love this because the guys on this show drop so many financial gems but do so in a very lighthearted and fun way. Their humor and jokes may give the perception of lack of serious-mindedness but if you listen beyond that it is evident their focus is on helping their listeners build wealth.
Smart Passive Income - I’m all about passive income so naturally I gravitated towards this podcast. Pat Flynn is awesome! He frequently pulls in over $100, 000 per month in passive income. He gives his listeners different ways to go about setting up passive income streams and his podcasts are always inspiring.
The Side Hustle Show - I love this podcast because they offer great tips and business strategies for those looking for multiple income streams. If you want to perhaps keep your 9-5, supplement your income and have a few extra bucks here and there this podcast is certainly for you. It’s very informative and every time I listen I learn ways to improve my own side hustle(s).
Choose FI - The podcast is great! Here FI stands for financial Independence and the hosts discuss life optimization strategies that are possible when we decide to get off the hamster wheel.
Profit Boss with Hilary Henershott - I recently started listening to this podcast and it has been quite informative. It’s geared towards women who want to take charge and create success in their financial lives. It has been very motivating and inspiring.
So if you’re looking to improve your financial situation, gain financial independence, retire early, start a side business or have passive income then I definitely recommend the above podcasts. Listen to episodes during your commute, at the gym, while running, etc. The knowledge gained can enlighten your path and brighten your future. Feel free to give feedback on your experience.
Happy Listening!