Q & A with a Financial Associate

Yesterday I spoke with a colleague of mine who is a former Financial Associate at a leading Investment and Retirement firm. After speaking with a few friends I decided to reach out to him to get his perspective on some common questions.

Derek: What are the best investment vehicles around these days?

Friend: Low risk investments such as CD's or your 401K to get most people started. For the most part unless someone has the time to do serious research or has a financial background that's the best place to start. 

D: How can investors get into the stock market with a low amount of money?

F: There are many ways to break into investing but many ways to get into trouble as well for beginners. Those with a low amount of free capital may want to look into mutual funds which can contain many different pieces of stock and can seek advice from professionals. There are different buy in requirements to look at so it doesn't hurt to shop around. Retirement accounts are another way in to getting comfortable with investing.

D:  What's some advice for first time investors?

F: Understand that there is definitely a chance of loss. You can't guarantee a profit so you should have this money separate from your savings. Think about money invested as a long term item and have patience. It takes time to get good returns as the market always fluctuates. Also, you should probably shy away from anything that seems too good to be true like penny stocks.

D: How can someone protect themselves against loss?

F: With investing loss is almost inevitable, but the best way to protect against loss is diversity. In your investment portfolio you should have a variety of investments that could cover each other for various events. Again, a professional could really help with setting up a diverse portfolio.

D: What questions should an investor ask themselves?

F: Figure out what you're really investing for. Is it for retirement? Short term cash or a long term goal? You really want to sit down with a finance professional and set realistic goals. Ask yourself what amount can I save to start investing? Do I already have a savings account or emergency fund (which is different from investing)? What can I afford to lose?

D: What questions should an investor as a broker?

F: What are the fees? What am I being charged? Don't be afraid to grill them and ask questions. The brokers work for clients and clients need to see what's best for them.

D: What investments should a casual investor look at?

F: An occasional investor should look to have a diverse portfolio that's managed by a broker(s), whether that's for personal investments or retirement accounts (401k, IRA, Roth etc.). Brokers get paid for that type of service regardless so they can be put to use to mitigate risk.

D: Any parting advice for those that still want to look at investing?

F: Don't be afraid to get into investing. Most people we know were raised to fear stocks and just don't know how to get into investing. It's as easy as picking up a phone and asking a few questions to a broker a financial company. Most people don't realize that leaving your money in a savings account actually loses money annually if inflation grows at an average of 3%. If you were to get a 3% return you would actually be just keeping even with inflation rather than growing your money. Knowing that I wanted to make my money work for me.

For those who are a little more advanced or really want in-depth information about investing from start to finish I recommend "Money Master the Game" by Tony Robbins. The book goes over several investment strategies that Tony Robbins received from some of the richest and most successful investors in the world. Some of the strategies aren't as prevalent as they were a few years ago but the concepts are still very valuable.