|Itís not hard to find advice on how to manage your money
these days. You can find plenty of it on the Internet, in books, magazines and
newspapers, from well-meaning friends and relatives, and of course, from
But while finding financial guidance is easy, judging the
worth of it can be a much tougher task. Even hiring a professional adviser is no
guarantee youíll get great advice. If youíre paying someone for a personalized
plan, though, you especially want to make sure youíre getting your moneyís
The true test is whether you reach your goals. But if your
goal is decades away Ė retirement, for example Ė you donít want to wait until
age 65 to see if you made the right moves.
I would encourage people to look at their overall
situation no less than annually and assess the quality of the service theyíre
So what things should you look at? Ask yourself these
questions when gauging money advice:
What are the numbers? The most obvious way to judge
investment advice is by performance. But make sure your expectations are
If you have a diversified portfolio, youíre going to
outperform the worst asset class but under perform the best. With that in mind,
donít look at just your pure rate of return. You donít have to be in the yearís
highest flying mutual funds and stocks to succeed.
Instead, you and your advisor should quantify your goals
when creating your financial plan.
That plan should include periodic, realistic mileposts to
check your progress against. If your net worth isnít growing as fast as youíd
forecast, examine why. Maybe it was just a down year in the market. Or maybe
youíve been too cautions with your investments and need to make a change.
What does your gut say? Can you stomach the investment
risk theyíre taking?
The real key is to remain invested.
Some discomfort is normal. Youíre not going to gain
anything without taking risks. But if youíre so nervous about the risk youíre
taking that you cannot stay invested, you need to talk to your advisor. If
youíre always buying at the top and selling at the bottom, you wonít build
You also should pay attention if your gut feeling is
telling you that your advisor isnít being honest with you.
If it doesnít feel right, it probably isnít. If your
advisor doesnít listen to you, doesnít return your phone calls, does some kind
of trading in your account that you didnít know about, you need to raise your
hand and say something.